Five Tax Planning Ideas for 2024

A high-net-worth individual can lose nearly half of their assets to income and estate taxes without proper planning. 

Individuals with a net worth exceeding $13.61M (single) or $27.22M (married) are currently subject to a 40% federal estate tax at death on assets above these exemptions. In addition, many states assess their own estate tax, driving costs even higher. This problem becomes greater in 2026 when these exemptions are scheduled to be reduced to projected amounts of (roughly) $7M (single) and $14M (married).  The following are five tax planning ideas that can mitigate both income and estate taxes, as well as a link for more information. 

1. Utilize a split-dollar strategy when buying/selling a business in order to provide enhanced value to the seller at a reduced cost to the buyer. 

One way to bridge the gap between the maximum price that a Buyer is willing to pay for a business and the minimum price that a Seller is willing to accept for that business is to keep the Seller on as a consultant and incorporate a split dollar life insurance program into the arrangement.  In a recent design applying this strategy, the Seller was able to receive (on a present value basis) 18% more value from the split dollar portion of the transaction than the relative cost paid by the Buyer.  For Buyers who are concerned about estate taxes and interested in wealth transfer, the value differential can be even greater. [Read More] 

2. Use a multi-generational split-dollar plan to freeze estate growth and maximize the wealth that can be transferred to future generations. 

We designed a multi-generational split-dollar plan that froze estate growth on the dollars involved and helped prevent what was already projected to be a significant estate tax bill from getting even worse.  An 80- and 78-year-old couple with a $40M taxable estate was able to freeze the growth on $10M dollars of estate value (with the potential for estate reduction as well) while funding a generation-skipping-tax-exempt trust that can protect their heirs from both transfer taxes and potential creditors for many years into the future. [Read More]

3. Generate guaranteed estate tax savings on a highly appreciated home (or vacation home) by combining a Qualified Personal Residence Trust (QPRT) with a life insurance policy. 

By entering creating a QPRT and insuring against the mortality risk by purchasing life insurance, a 60-year-old individual who currently owns a home worth $5M that is projected to increase in value by 6% per year is projected to save $6.4M in estate tax. [Read More]  

4. Create a “Switch” Dollar life insurance plan that dramatically reduces the cost of wealth transfer. 

By utilizing an economic benefit Split Dollar plan structure at the outset, with an eye toward switching to a loan regime Split Dollar plan structure in the future, a 59-year-old couple is projected to reduce the transfer tax cost of providing their family with tax-free death benefit by more than 50%. [Read More] 

5. Maximize wealth transfer by taking advantage of favorable mortality arbitrage between a universal life contract and a single premium immediate annuity. 

A 75-year-old individual made a one-time contribution to an annuity arbitrage program using a structure designed to transfer significant wealth to future generations without income tax, gift tax, estate tax, or generation-skipping transfer tax. This strategy can be a perfect fit for clients who have already used all of their lifetime gifting exemption. [Read More]