As we approach 2025, the sunsetting of current estate tax laws looms large, bringing with it significant implications for high net-worth individuals and families. Without legislative intervention, the federal estate tax exemption will dramatically reduce from $13.61 million per person in 2024 to approximately $7 million in 2026, adjusting for inflation. This change is poised to expose many more estates to federal estate taxes.
While it is uncertain whether new legislation will prevent this sunset, it is crucial for advisors to proactively prepare for client discussions and consider estate planning strategies now. This preparation is especially important when incorporating multi-generational gifts and charitable planning. The Omaha Community Foundation (OCF) can be a part of these conversations to discuss options that can be tailored to your clients charitable giving goals.
Strategic Charitable Giving
For clients inclined toward charitable giving, larger lifetime gifts to nonprofits and arranging for charitable bequests can significantly reduce the taxable estate due to the charitable estate and gift tax deduction. OCF is a flexible and effective charitable recipient for both lifetime and estate gifts through our various funds types, including Donor Advised, Field of Interest, and Designated Funds.
Charitable Lead Trusts
Charitable lead trusts are particularly effective in the current environment. These trusts provide income to a client’s fund at OCF for a set period, with the remaining assets eventually passing to family members. With the current exemption level, your clients can provide a significant funding into the trust, as the value of the remainder interest counts toward the client’s estate and gift tax exemption.
Generation-Skipping Trusts
Generation-skipping trusts are irrevocable trusts benefiting a client’s grandchildren and subsequent generations. These trusts utilize a client’s generation-skipping transfer tax exemption, which parallels the estate and gift tax exemption. Establishing these trusts now can take advantage of the higher exemption before it potentially drops in 2026.
Multi-Generational Funds
In addition to charitable lead or generation-shipping trusts – or as standalone strategy – clients can establish a Donor Advised Fund (DAFs)at the Omaha Community Foundation. The DAF can function much like a family foundation, with successive generations serving as advisors.
Preparing for the Future
The impending changes to estate tax laws underscore the importance of strategic planning. By considering charitable giving and multi-generational wealth transfer plans now, clients can mitigate potential tax liabilities and create lasting legacies. The Omaha Community Foundation stands ready to assist you and your clients achieve their long-term charitable goals, providing expertise and flexible solutions, even amidst the uncertainty surrounding estate tax laws.
We look forward to working with you to navigate these uncertainties and help your clients make impactful, tax-efficient charitable contributions. Together, we can ensure that their philanthropic vision endures for generations to come.
Contact Us
Contact the Donor Services Team at the Omaha Community Foundation to learn about how we can help you help your clients with tax-savvy charitable giving solutions. You can reach us at giving@omahafoundation.org or 402-342-3458.