Estate Planning Basics: Protecting Wealth for the Next Generation

When it comes to securing your family’s financial future, estate planning is one of the most important but often overlooked steps. Whether you’re building wealth, preserving it, or preparing to pass it down, understanding the fundamentals of estate planning can make all the difference. And with the recent passage of the One Big Beautiful Bill (OBBBA), key changes to estate tax exemptions mean your strategy may need an update. Let’s break down what you need to know.

Why Estate Planning Matters

Estate planning is more than just creating a will. It’s a comprehensive strategy that helps ensure:

• Your assets go to the people or causes you choose.
• Your estate avoids unnecessary taxes and legal complications.
• Your loved ones are protected and guided through the process.

Without a plan, your estate could be tied up in probate court, eroded by taxes, or distributed in a way that doesn’t align with your wishes.

Core Components of an Estate Plan:

A basic estate plan typically includes:

1. A Will – Outlines who inherits your property and appoints guardians for minor children.
2. Revocable Living Trust – Allows your assets to bypass probate, maintain privacy, and be managed during incapacity.
3. Power of Attorney (POA) – Appoints someone to manage your financial affairs if you become incapacitated.
4. Healthcare Directive – Specifies your medical preferences and names someone to make decisions on your behalf.
5. Beneficiary Designations – On retirement accounts, insurance policies, and more; these override your will.

How to Protect Wealth for the Next Generation

Protecting generational wealth involves strategic planning that minimizes tax exposure and maximizes asset transfer efficiency. Here are a few key tools and tactics:

1. Use of Trusts

Trusts provide control, protection from creditors, and potential tax advantages. Options include:

• Irrevocable Life Insurance Trusts (ILITs)
• Generation-Skipping Trusts
• Grantor Retained Annuity Trusts (GRATs)

2. Annual Gifting

For 2025, you can gift up to $19,000 per person (or $38,000 for married couples splitting gifts) annually without affecting your lifetime exemption. Over time, this can move significant wealth out of your estate, permitting no significant changes in these rules.

3. Family Limited Partnerships

These allow you to shift ownership of a family business or investments to heirs at a valuation discount while retaining control. ¹

• Example: having a discount of 40% on 100k of assets. In turn, only 40k shows up for tax purposes, which would not reduce the gift exclusion as much as anticipated.

Estate Tax Exclusion: What’s Changed in 2025?

The One Big Beautiful Bill, passed in July 2025, brought major and permanent changes to the federal estate and gift tax rules:

• For 2025, the lifetime estate and gift tax exemption is $13.99 million per individual, or $27.98 million per married couple.
• Starting in 2026, the exemption amount increases to $15 million per individual and $30 million per couple, indexed for inflation going forward.

This is a significant departure from earlier rules that would have cut the exemption in half by 2026 due to the sunset of provisions under the 2017 Tax Cuts and Jobs Act (TCJA).

Why This Matters
If your estate exceeds the exemption amount, the excess could be taxed at rates up to 40% federally. While the higher exemption offers breathing room, it also presents opportunities for proactive planning, especially for high-net-worth families

Key Planning Takeaways

• Act in 2025: You can still use the full $13.99M exemption this year for large gifts or trust funding before the increase in 2026.
• Take a long-term view: With the new exemption floor rising to $15M and growing with inflation, your estate plan may be less about urgency and more about strategic layering of gifts over time.
• Review and revise: Existing estate plans built around the previous sunset provisions may now be outdated. Trust formulas, credit shelter trusts, and gifting strategies may need updates.
• Work with professionals: A CFP®, estate planning attorney, and tax advisor can help tailor a plan that reflects the new laws and your family’s unique goals.

Final Thoughts

Estate planning is not just for the ultra-wealthy; it’s for anyone who wants to protect their loved ones, preserve their values, and ensure their legacy. With new, more generous estate tax exemptions now set in law, the next few years are a crucial window to optimize your estate strategy. If you haven’t reviewed your estate plan recently, or if you don’t have one, now is the time to take action. Your future self and your heirs will thank you.

Need help creating your retirement or estate plan?
Connect with a Canter Wealth advisor to build a customized strategy that aligns with your goals and secures your legacy.

Sources:

_{1.RSM US LLP. (2024, September 9). Estate planning Q&A: Family limited partnerships explained. RSM Insights. Retrieved from https://rsmus.com/insights/tax-alerts/2024/estate-planning-qa-family-limited-partnerships-explained.html}

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