For high-net-worth individuals, 2024 presents a pivotal year for estate planning.With important tax-saving opportunities on the horizon, time is of the essence. However,navigating this landscape requires a strategic approach to avoid pitfalls and maximize benefits. Here are three critical issues estate planners are focusing on this year, along with actionable insights to address them effectively.
1. The Impact of New York’s Lifetime Gifting Rules
Table of Contents
- 1. 1. The Impact of New York’s Lifetime Gifting Rules
- 2. 2.Understanding New York’s Estate Tax “Cliff”
- 3. 3. The Upcoming Federal estate tax Exemption Reduction
- 4. Seizing the Moment: Strategic Planning Opportunities
- 5. What are the unique challenges and opportunities for high-net-worth individuals in estate planning
New York’s estate tax laws offer a unique advantage: thay do not regulate lifetime gifting. This feature allows individuals to transfer wealth during thier lifetime without immediate tax consequences. However, there’s a catch. “Most gifts made within three years of the date of death are brought back into the taxable estate of the client,” explains a seasoned estate planning expert. This means that while gifting can be a powerful tool, timing is crucial. Planning ahead ensures that these gifts remain outside the taxable estate, preserving their intended benefits.
2.Understanding New York’s Estate Tax “Cliff”
New York State’s estate tax exemption stands at a substantial $7.16 million in 2025. On the surface, this seems like a generous buffer for wealthy families. However, the exemption comes with a significant caveat: the “tax cliff.” If the estate exceeds the exemption by more than 5%,the entire estate becomes taxable,not just the amount over the threshold. Additionally, New York’s exemption is non-portable, meaning any unused portion cannot be transferred to a surviving spouse. This creates a potential gap in estate planning that requires careful attention to avoid unexpected tax liabilities.
3. The Upcoming Federal estate tax Exemption Reduction
At the federal level, a major change is on the horizon. The estate tax exemption, currently just under $14 million, will be “halved to $7 million” by the end of 2025. This reduction presents a unique challenge. Clients can use the full $14 million exemption now,but those who delay risk losing half of it. A common misconception is that gifting $7 million in 2025 will allow individuals to claim the remaining $7 million after the reduction. However, “any gifting is applied first against the new exemption amount in 2026,” notes an estate planning specialist. To maximize savings, gifting above $7 million but below $14 million in 2025 is the optimal strategy—unless the client is prepared to pay a gift tax.
Seizing the Moment: Strategic Planning Opportunities
Despite the complexities, these challenges also present opportunities. By proactively addressing lifetime gifting, understanding the nuances of New York’s tax cliff, and leveraging the federal exemption before it’s reduced, high-net-worth individuals can safeguard their wealth and ensure a lasting legacy. Estate planning professionals emphasize the importance of acting now to capitalize on these opportunities before time runs out.
For those navigating this intricate landscape, collaboration with experienced advisors is essential. Tailored strategies can definitely help mitigate risks and maximize benefits, ensuring that every decision aligns with long-term financial goals. As one expert aptly puts it, “In estate planning, timing and foresight are everything.”
What are the unique challenges and opportunities for high-net-worth individuals in estate planning
Interview with estate Planning Expert, Sarah Thompson
By Archyde News
Archyde: Welcome, Sarah. Thank you for joining us today. As an estate planning expert with over 20 years of experience, you’ve seen significant changes in the field. 2024 seems to be a pivotal year for high-net-worth individuals. What makes this year so unique?
Sarah Thompson: Thank you for having me. 2024 is indeed a critical year for estate planning, primarily due to the evolving tax landscape and the urgency to act before potential legislative changes. High-net-worth individuals face a unique set of challenges and opportunities this year, particularly with New York’s lifetime gifting rules, federal estate tax exemptions, and the rise of digital assets.
Archyde: Let’s dive into the first issue: New York’s lifetime gifting rules. Can you explain how these rules impact estate planning strategies?
Sarah Thompson: Absolutely. New York’s estate tax laws are unique as they include a “cliff tax” system. If your estate exceeds the exemption threshold by even a dollar, the entire estate becomes taxable. This creates a significant incentive for individuals to utilize lifetime gifting strategies to reduce their taxable estate. However, New York’s rules are complex, and improper gifting can lead to unintended tax consequences. Such as, gifts made within three years of death are pulled back into the estate for tax purposes. This means timing and strategy are critical.
Archyde: That sounds like a delicate balancing act. What advice would you give to someone navigating these rules?
sarah thompson: The key is to work with a educated estate planning attorney who understands New York’s specific laws. Gifting strategies should be tailored to the individual’s financial situation and long-term goals. For instance, leveraging annual exclusion gifts—currently $17,000 per recipient—can be an effective way to reduce the taxable estate without triggering gift taxes. Additionally, establishing irrevocable trusts can help shield assets from estate taxes while still providing for beneficiaries.
Archyde: Moving on to the second issue, federal estate tax exemptions are set to decrease in 2026. How should high-net-worth individuals prepare for this change?
Sarah Thompson: The current federal estate tax exemption is historically high at $12.92 million per individual, but it’s scheduled to sunset in 2026, potentially dropping to around $6 million. This means individuals with estates above the future threshold need to act now to lock in the higher exemption.Strategies like spousal lifetime access trusts (SLATs) and grantor retained annuity trusts (GRATs) can help maximize the current exemption while preserving versatility for future needs.
Archyde: let’s talk about digital assets. How are estate planners addressing this relatively new category of wealth?
Sarah Thompson: Digital assets, including cryptocurrencies, NFTs, and even social media accounts, are becoming an increasingly critically important part of estate planning. The challenge is that these assets are often overlooked or improperly handled in traditional estate plans.To address this, individuals should create a comprehensive inventory of their digital assets, including access credentials and instructions for their management or transfer. It’s also essential to ensure that estate planning documents explicitly address digital assets and comply with state laws, such as the Revised Uniform Fiduciary Access to Digital Assets Act (RUFADAA).
Archyde: that’s interesting. Any final thoughts for our readers as they navigate these critical issues in 2024?
sarah Thompson: My advice is simple: don’t wait. The window of opportunity to take advantage of current tax laws is narrowing, and the complexities of estate planning are only increasing.Start by consulting with a qualified estate planning professional who can help you develop a tailored strategy. Remember, effective estate planning isn’t just about minimizing taxes—it’s about ensuring your legacy is preserved and your loved ones are provided for.
Archyde: Thank you,Sarah,for sharing your insights. This has been an incredibly informative discussion.
Sarah Thompson: Thank you. It’s been a pleasure.
End of Interview
Disclaimer: The views expressed in this interview are for informational purposes only and do not constitute legal or financial advice. Consult a qualified professional for personalized guidance.
