Strategic Tax and Estate Planning: Business, Charity, & Navigating Tax Changes

Tax Day and Estate Planning

With the tax filing deadline looming, it’s a pivotal time to ensure estate and tax planning are in harmony. Today, we’ll review Proposition 19, changes in federal estate taxes, and intricacies of business ownership interests, and charitable giving within estate planning.

Proposition 19 and Estate Planning in California

California’s Proposition 19 has significantly impacted property tax rules, affecting estate planning, particularly for real estate assets. Notably, it revised the parent-child exclusion, limiting the conditions under which property taxes are reassessed upon transfer. This change necessitates a fresh look at how real estate is held, especially for property-rich, cash-poor estates.

Federal Estate Tax Exemption: A Timely Concern

Here’s a shocker: California doesn’t have an estate tax! However, it’s not so as it relates to federal taxes. The current federal estate tax exemption is $13.61 million per individual for 2024, a temporary reprieve for large estates. The government taxes any amount above that threshold at 40%. This exemption is slated to decrease in 2026 to an estimated $6.5-$7 million, with the excess taxed at 45%. This expected reduction emphasizes the need for strategic estate planning today to prepare for tomorrow’s tax environment.

Managing Business Interests in Estate Planning

For S corporation and LLC owners, integrating business interests into your estate plan requires careful consideration to ensure continuity and minimize tax liabilities. Trusts can be a strategic vehicle for these interests, offering control and tax advantages. However, the tax treatment of transferred interests varies, making it essential to collaborate with estate and tax professionals for an optimized strategy.

Charitable Giving Through Trusts

Charitable remainder trusts (CRTs) are a prime example of how strategic planning can fulfill philanthropic goals while providing tax benefits. CRTs allow you to support charity, receive a tax deduction, and potentially secure an income stream. Similarly, other trusts, such as irrevocable life insurance trusts (ILITs), grantor retained annuity trusts (GRATs), and qualified personal residence trusts (QPRTs), offer avenues to reduce estate tax exposure while achieving your estate planning objectives.

Bringing It Together

The interplay of estate planning and tax strategies, including the nuances of Proposition 19 and federal estate tax changes, underscores the importance of a comprehensive approach. At Aisha Williams Law, we specialize in holistic estate planning that meet today’s legal and tax requirements and anticipate future changes. By coordinating with a team of trusted advisors, including tax professionals and financial planners, we ensure that your estate plan is robust, flexible, and aligned with your long-term vision.

Start Today

For a tailored estate plan that navigates these complexities, turn to Aisha Williams Law. Let’s secure your legacy with a strategy that reflects your values, supports your business, and maximizes your philanthropic impact.

Connect with Aisha Williams Law today! We’ll explore how to integrate your aspirations into a comprehensive estate plan, ready for evolving tax law. Our expertise is your peace of mind.

This article is a service of the Law Office of Aisha M. Williams, APC, serving San Diego, Carlsbad, Escondido, and all of California. We don’t just draft documents. We ensure you make informed decisions about life and death for yourself and the people you love. That’s why we’ll start you with a  Family Wealth Planning Session, during which you will get more financially organized than you’ve ever been before and make all the best choices for the people you love.

We created this material solely for educational and informational purposes. It does not serve as ERISA, tax, legal, or investment advice. Should you need legal advice tailored to your specific needs, you must seek such services independently.