A ‘Golden’ Trifecta Offers Rare Opportunity For Advanced Tax And Estate Planning



The final weeks of 2021 are a golden opportunity for advisors to engage in tax and estate planning with their high-net-worth clients, but the window to make big money moves may be closing.


There are three reasons that this may be the best opportunity for tax and estate planning, said Jason Cain, senior managing director and chief wealth strategist of Massachusetts-based Boston Private.


“We can help our clients avoid taxes and use all the tools in our tool box to preserve their wealth for generations to come,” said Cain. “All three of these reasons are nothing new. Your clients aren’t really evading taxes any more than someone who is taking a standard deduction. But we should avail ourselves of all the laws and benefits created for us.”


Rising Exemptions

The lifetime gift and estate tax exemption is rising to $11.85 million next year, said Cain, but there is a lot of speculation that Congress will act to cut the exemption, and in any case, the current law will cut it by nearly half at the end of 2025.


“You now, for a short period, have significant families for whom the estate taxes are no longer an issue,” said Cain. “So if I have a family with $50 million, the total exemption is $23.5 million for a married couple and that will drop to $12 million in 2026—meaning in 2026 they would be looking at around $1.5 million in potential federal estate tax. The interesting thing is that so many people think they need to give away assets to start using that exemption now.”


There are structures, like the spousal lifetime access trust (SLAT), that can make use of the exemption now while retaining the assets.


A SLAT typically names a spouse and sometimes other family members as income beneficiaries of the trust, with the remainder going to other beneficiaries like children or grandchildren.


“Say I am married, 53 years old with 34 more years of life expectancy, and I have $11.7 million,” said Cain. “If I put that $11.7 million in a SLAT today using my lifetime exemption and it grows to $40 million over time, that $40 million is outside of my estate and also protected from creditors—and my spouse has immediate access to that trust as a discretionary beneficiary, enabling indirect access for myself.”


Using a trust in this manner locks in the exemption before it is reduced in 2026 or sooner by an act of Congress.


Declining Asset Values

“If I have [an] $11.7 million exemption and [there is] a dislocation in the market that I think is going to come back to normal levels of growth in the future, then putting in $11.7 million now before my assets normalize back to $15 million becomes an enormous advantage,” said Cain.

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