Creating a proper wealth plan is essential for the preservation of a family’s wealth and legacy. It is equally critical to ensure that a plan can adapt to changing circumstances. In 2022 and 2023, much has changed. Financial market moves and shifting laws have created both risks and opportunities. Wealth planning strategies that were previously attractive have become less so and vice versa.

There are various reasons for avoiding the creation and updating of wealth plans; however, the lack of planning or failure to update a plan may result, among other things, in:

• Lack of protection of assets during your lifetime and thereafter
• Inheritance disputes
• Slow administrative procedures
• Asset depletion
• Unnecessary taxes

This paper highlights several wealth planning strategies to help achieve financial goals, including:

1.     Utilizing the all-time high federal transfer tax exemption amounts

2.     Planning techniques in a volatile market

3.     Planning for the current interest rate environment 

4.     Ensuring trust terms remain aligned with your intentions

5.     Making gifts to minors

6.     Urging family members to plan for their wealth

Ideally, you should create a plan at the earliest opportunity and revisit it regularly or as warranted by changing circumstances. These may include changes in your family, your wealth, or the economic, legal, and tax environment. By acting sooner rather than later, you may be able to create tax savings, ensure that appropriate fiduciaries are in place and ensure that assets are distributed to desired beneficiaries. 

Exemption amounts for federal gift and estate tax have increased for 2024 to all-time highs of $13.61 million per individual ($27.22 million per married couple) up from $12.92 million and $25.84 million respectively in 2023. This year-over-year increase was more significant than those seen in recent years due to higher inflation. These amounts represent a significant opportunity for additional tax-free gifts for people who have already used their full lifetime gift tax exemption in previous years.

It is also important to note that under the current law, these exemption amounts are scheduled to decrease by about half at the beginning of 2026. However, the reduction could conceivably be greater and occur sooner, depending on whether new tax legislation is enacted.

At the same time, interest rates have increased significantly. This can impact existing wealth plans and certain popular wealth transfer strategies. Previously, many planning strategies relied upon low interest rates as a means to transfer wealth at low cost to future generations. But while higher interest rates create challenges for certain strategies, they can also create new opportunities and increase the appeal of strategies that were less advantageous in a low interest rate environment.