Strategic Estate + Tax Planning for Lasting Wealth

What exactly is advanced estate planning? How is it different from a basic estate plan?

A basic estate plan generally includes core legal documents such as a revocable living trust, a pourover will, financial powers of attorney, and advance healthcare directives. These foundational tools ensure that your personal and financial affairs are properly managed if you become incapacitated, and that your assets are transferred efficiently and according to your wishes upon your death. While a basic plan provides essential protections and avoids probate in most cases, it is not designed to address the more complex tax, business, or asset protection issues that often arise in higher-net-worth families.

Advanced estate planning, on the other hand, goes several steps further. It is far more strategic and tax-focused, specifically aimed at reducing or eliminating federal estate, gift, and generation-skipping transfer (GST) taxes while maintaining long-term control, flexibility, and privacy. It also considers unique family dynamics, multigenerational planning, creditor protection, philanthropic goals, and the preservation of closely held businesses or real estate portfolios. This type of planning becomes essential when an individual or couple’s projected estate may exceed the lifetime estate and gift tax exemption—currently $13.99 million per person, or $27.98 million per married couple, in 2025. This lifetime exclusion has been made permanent at $15 million for 2026, indexed for inflation thereafter. As such, advanced estate planning isn’t just for the ultra-wealthy—it’s also for individuals and families whose estates may cross into taxable territory due to real estate growth, inheritance, or business ownership.

When should someone consider advanced estate planning?

Advanced estate planning should be considered when your total net worth—including homes, business interests, investments, retirement accounts, and life insurance death benefits—approaches or exceeds the federal exemption amount. For 2025, that threshold is $13.99 million per person, with the threshold being made permanent at $15 million in 2026. Advanced planning is also warranted if you are contemplating large lifetime gifts, want to proactively protect assets from potential creditors or divorcing spouses, or need to provide for financially immature or disabled beneficiaries through carefully designed trusts. If you own illiquid assets like a closely held business, farmland, or a significant real estate portfolio, planning ahead is critical to avoid forced sales at death just to pay estate taxes. Early and proactive planning gives you more tools and flexibility, especially for removing appreciation from your estate over time.

What are the most common tools used in advanced estate planning?

When it comes to transferring wealth tax-efficiently, the estate planning toolkit offers a wide array of sophisticated options. We often refer to these as the “alphabet soup” of advanced planning—acronym-heavy strategies like GRATs, IDGTs, SLATs, ILITs, and more—that can be carefully tailored to a client’s needs, timing, and assets.

A good starting point is outright gifting. The annual gift tax exclusion for 2025 is $19,000 per recipient, meaning an individual can gift up to that amount to as many people as they like without incurring gift tax or using their lifetime exemption. Married couples can split gifts, allowing them to give up to $38,000 per recipient annually. Over time, these exclusion gifts can significantly reduce the size of your taxable estate. Gifts made during periods of market volatility or at discounted valuations can have an outsized impact. For education planning, 529 Plans continue to be useful—they allow “superfunding” of up to five years of exclusion gifts (up to $95,000 per beneficiary in 2025) with no gift tax implications, so long as the donor survives the full five years.

Intra-family loans, governed by Section 7872 of the Internal Revenue Code, offer another effective method of wealth transfer, particularly when structured using the Applicable Federal Rate (AFR), which is often much lower than commercial loan rates. Properly documented, these loans avoid imputed interest and can be used to finance business purchases, home acquisitions, or investments for younger family members while keeping appreciating assets growing outside your estate.

For clients concerned with estate liquidity and tax efficiency, Irrevocable Life Insurance Trusts (ILITs) are still a cornerstone of advanced planning. When structured properly, the life insurance death benefit is excluded from your taxable estate and can be used to equalize inheritances or provide liquidity for estate tax payments without burdening surviving heirs. Premiums paid into the ILIT may also qualify for the annual gift exclusion if structured as “Crummey” gifts.

A Spousal Lifetime Access Trust (SLAT) allows one spouse to create an irrevocable trust for the benefit of the other, removing assets from the taxable estate while maintaining a measure of indirect access to the funds through the beneficiary spouse. SLATs have been particularly attractive due to the expiring high exemption amounts in 2026 but the passage of the Big Beautiful Bill put that sunset on hold for the time being. However, they must be carefully drafted to avoid the “reciprocal trust doctrine,” which can negate tax benefits if not structured correctly.

Among the most potent tax-advantaged structures are Grantor Retained Annuity Trusts (GRATs). With interest rates rising (the Section 7520 rate for July 2025 is 5.0%), GRATs work best with volatile or high-growth assets that are expected to outperform the IRS’s assumed rate of return. By retaining an annuity for a set number of years and “zeroing out” the taxable gift, any appreciation beyond the annuity goes to your beneficiaries gift-tax free.

Qualified Personal Residence Trusts (QPRTs) allow for discounted transfers of a primary or vacation home by giving you the right to live in the property for a fixed period. If you survive the term, the home passes to your heirs at a reduced tax cost. Because of their risk if death occurs during the retained term, QPRTs are often used by clients in good health who are comfortable with relinquishing full control in the future.

Intentionally Defective Grantor Trusts (IDGTs) combine the benefits of a sale transaction and a grantor trust. You sell appreciating assets to the trust in exchange for a promissory note, locking in today's valuation and freezing future appreciation out of your estate. The grantor continues to pay income tax on the trust’s earnings, allowing further “tax burn” that reduces the taxable estate without additional gifting. IDGTs are ideal for clients transferring discounted interests in family businesses, real estate, or intellectual property.

More specialized techniques include Dynasty Trusts, which allow wealth to grow for multiple generations without incurring estate taxes at each generational level, thanks to the use of the Generation-Skipping Transfer (GST) exemption. Others include Charitable Lead Trusts (CLTs) for philanthropy-first families, DINGs and NINGs for income tax planning using states like Delaware or Nevada, and WINGs (Wealth Irrevocable Grantor Trusts), which are hybrids offering flexibility for long-term management.

Ultimately, the effectiveness of any advanced strategy hinges on your family goals, cash flow needs, risk tolerance, and asset mix. Many of these techniques require careful coordination across legal, tax, and financial disciplines and should be implemented as part of a unified, forward-thinking wealth transfer plan.

What role does family governance play in estate and legacy planning?

Family governance is often the missing link in long-term estate planning. It refers not to legal documents or tax strategies, but to the ways in which families make decisions, communicate across generations, resolve conflicts, and define their shared values around wealth and legacy. In our experience, good governance is just as critical as a well-structured trust or tax-efficient transfer. In fact, most generational wealth transfers fail not due to taxes or legal complexity, but because of a breakdown in communication or alignment among heirs. Our process includes optional family meetings, age-appropriate financial education for younger generations, and legacy-focused planning sessions that encourage transparency and strengthen intergenerational trust. We often help families draft legacy letters, philanthropic mission statements, and even establish informal governance structures such as family councils or boards to ensure that their values—not just their wealth—endure long after they're gone.

How does advanced estate planning help protect my heirs?

Advanced estate planning goes beyond tax savings to address one of the most common concerns among wealth creators: how to protect heirs from external threats—like lawsuits, creditors, or divorce—as well as internal ones, such as poor financial judgment or lack of preparation. Carefully designed irrevocable trusts, particularly when layered with provisions like discretionary distributions, spendthrift clauses, and protections against commingling in divorce, can provide robust asset protection while still allowing trustees flexibility to support beneficiaries with education, health care, business ventures, or housing. For families looking to protect wealth across generations, dynasty trusts can be particularly effective. These multigenerational vehicles combine tax efficiency with long-term control, giving families the tools to build both financial security and responsible stewardship. The goal isn’t to restrict your heirs—it’s to empower them with resources, guidance, and safeguards that encourage growth while preserving the legacy you’ve built.

What is a dynasty trust and how does it work?

A dynasty trust is a long-term irrevocable trust designed to preserve family wealth across multiple generations without incurring estate taxes at each level. These trusts are typically funded with lifetime gifts that use a portion of your federal gift and Generation-Skipping Transfer (GST) tax exemptions—currently $13.99 million per person in 2025, or $27.98 million for a married couple. By allocating exemption at the time of funding, families can “freeze” the trust assets outside the estate and GST systems, allowing them to grow without further transfer tax exposure. Dynasty trusts are often established in jurisdictions like Delaware, Nevada, or South Dakota, which allow trusts to exist in perpetuity or for many generations. In addition to the tax benefits, these trusts provide strong asset protection, can hold complex assets like private equity or family business interests, and can be tailored with flexible features such as trust protectors, decanting powers, and powers of appointment. Dynasty trusts are often considered the gold standard for families seeking to build enduring structures that preserve both capital and values over time.

How is the Generation-Skipping Transfer Tax (GSTT) calculated?

The Generation-Skipping Transfer Tax is a separate layer of federal tax—currently 40%—imposed when assets are transferred to someone who is more than one generation below the donor, such as a grandchild or great-grandchild, or to unrelated individuals more than 37½ years younger. To avoid or minimize the GSTT, individuals can allocate their lifetime GST exemption, which in 2025 is $13.99 million per person, to specific transfers or trusts. Whether or not the GST applies depends on the inclusion ratio, which is calculated using the "applicable fraction"—that is, the amount of exemption allocated (numerator) divided by the value of the transferred property (denominator). An inclusion ratio of zero means the transfer is fully exempt from GST tax, while a ratio of one means it is fully taxable. Anything in between results in a proportional tax.

In practice, most GST planning aims for simplicity by creating trusts that are either entirely exempt or fully subject to GST, rather than mixing allocations. Because the GST tax is imposed in addition to gift or estate tax, even a partially taxable transfer can trigger substantial liability if not properly planned. Our approach helps clients navigate these complexities through strategic exemption allocation, trust structuring, and ongoing administration to ensure compliance and align with their broader legacy goals.

How can charitable giving be part of my legacy?

Charitable planning continues to be one of the most effective ways to align personal values with tax efficiency while making a lasting impact on the causes you care about. With the federal estate and gift tax exemption at $13.99 million per individual in 2025 (or $27.98 million for married couples), many high-net-worth individuals are seizing this window of opportunity to incorporate philanthropy into their legacy strategies. Donor-Advised Funds (DAFs) remain a popular and flexible option—allowing you to receive an immediate income tax deduction for contributions while retaining the ability to recommend grants to qualified charities over time. For those seeking more control and visibility, a private foundation offers the ability to direct charitable giving on a broader scale, although it requires annual filings, governance oversight, and compliance with self-dealing and minimum distribution rules under Sections 4940–4945 of the Internal Revenue Code.

More advanced structures, like Charitable Remainder Trusts (CRTs), provide a unique combination of income for life, capital gains tax deferral, and charitable deduction benefits. CRTs allow you to contribute appreciated assets—such as real estate or stock—without incurring immediate capital gains tax. The trust sells the asset tax-free, reinvests the proceeds, and pays you (or another non-charitable beneficiary) income for life or a term of years. The remainder then goes to a qualified charity. The Section 7520 rate, which is 5.0% as of July 2025, plays a key role in determining your deduction. Conversely, Charitable Lead Trusts (CLTs) function in reverse: they pay a stream of income to charity first, with the remaining assets eventually returning to your heirs, often at a reduced gift or estate tax cost, particularly if structured to leverage the current high exemptions or valuation discounts. Our role is to help you select the right giving vehicle based on your income needs, philanthropic vision, and estate planning goals—often coordinating with broader family governance frameworks or mission statements to ensure that your charitable legacy is both effective and enduring.

What if my estate includes non-liquid assets or a family business?

Liquidity remains one of the most overlooked issues in estate planning—particularly for clients whose wealth is concentrated in real estate, closely held businesses, or illiquid investments like private equity. Federal estate taxes are generally due within nine months of death, and in the absence of careful planning, heirs may be forced to sell legacy assets under pressure. To avoid this outcome, we implement tailored liquidity strategies. Irrevocable Life Insurance Trusts (ILITs) are commonly used to provide tax-free liquidity to the estate, allowing heirs to cover taxes and expenses without selling core assets. In business contexts, we often structure or update buy-sell agreements, including cross-purchase or entity-redemption plans, which allow for orderly ownership transitions and may be funded through life insurance.

We also have strategic referral partners to help advise on electing Section 6166, which allows estates holding qualifying closely held business interests to defer estate taxes and pay in installments over 10 to 15 years—a powerful tool for preserving family enterprises. Where appropriate, we can structure installment sales, note receivables, or GRATs (Grantor Retained Annuity Trusts) to generate liquidity within the estate or provide a steady stream of income to beneficiaries. All of these solutions are evaluated not only for their tax impact but also for their ability to align with succession planning, family harmony, and long-term asset stewardship.

How does business succession planning relate to estate planning?

For business owners, your estate plan is incomplete without a clear and legally binding succession strategy. Whether your long-term goal is to pass the business to children, sell to key employees, or exit through a third-party transaction, the transition should be built into your estate documents and coordinated with your ownership structure. We often help clients reorganize or recapitalize their businesses—converting voting and non-voting shares, using valuation discounts where allowed, and implementing gifting strategies that take advantage of the $13.99 million lifetime exemption and annual exclusions (which are $19,000 per recipient in 2025, or $38,000 for married couples).

Buy-sell agreements are essential not just for tax planning but for setting expectations, retaining talent, and minimizing family disputes. We also facilitate communication among family and non-family stakeholders, especially where governance, compensation, or voting rights might shift post-transition. By integrating business succession planning with your estate planning early, you not only reduce tax exposure but also increase the odds that your business will survive and thrive in the next generation.

How often should I revisit my estate plan?

Estate planning is not a one-time event—it’s a process that must evolve alongside your life, assets, and the law. We recommend revisiting your plan every three to five years, or immediately following any major life event. These include marriage, divorce, the birth of a child or grandchild, a significant inheritance, business sale, or a major change in health or net worth. Just as importantly, tax laws shift frequently. With the recent passage of the Big Beautiful Bill, the applicable exclusion amount has been made permanent at $15 million starting in 2026. Just as with the two previous tax reforms, this amount will be indexed for inflation after 2026.

We help clients stay ahead of these changes through a proactive review process—often as part of an ongoing maintenance program that monitors changes in law and family circumstances. Our goal is to ensure your documents, fiduciary appointments, tax strategies, and legacy structures stay aligned with your goals, your family’s evolving needs, and the legal landscape. Regular review turns estate planning from a static task into a dynamic and enduring family strategy.

What is a Charitable Remainder Trust (CRT)?

A Charitable Remainder Trust (CRT) is a sophisticated estate planning tool that allows for the deferral of capital gains tax on the sale of highly appreciated assets (such as real estate, stocks, or businesses) and can provide a structured income stream for the donor or other non-charitable beneficiaries for a specified term or for life depending on the type of CRT chosen. It uniquely incorporates charitable giving into its structure, providing an immediate income tax deduction for the donor in the year the trust is funded. This deduction, which can be carried forward for five years, is calculated based on the present value of the future gift to the charity. CRTs are effective in reducing the size of a taxable estate by removing the contributed assets from it.

The primary tax advantages of a CRT are multifaceted. When appreciated assets are transferred to a CRT and subsequently sold by the trustee, the capital gains tax on that sale is deferred. Donors receive an immediate income tax deduction for the charitable contribution, which can offset current income and be carried forward. The assets contributed to the CRT are removed from the donor's taxable estate, reducing potential federal estate tax liability. The donor also receives a regular income stream from the trust, which can be particularly beneficial for retirement planning. For 2025, valuation of charitable interests is based on the IRS Section 7520 rate, which is 5.0% for July. This rate is crucial for determining the charitable deduction available and the minimum remainder interest that must pass to the qualified charity. CRTs, especially when paired with life insurance strategies, continue to offer flexible solutions that align tax savings with philanthropic intent, making them a popular component of high-net-worth estate plans.

What are the tax benefits of using a CRT?

The tax advantages of a Charitable Remainder Trust (CRT) remain a powerful tool in estate and income tax planning. When appreciated assets—such as highly valued real estate, stocks, or closely held business interests—are contributed to a CRT and subsequently sold by the trust, capital gains taxes are deferred, allowing the full, untaxed proceeds to be reinvested within the trust. This tax deferral enables greater asset growth over time compared to a taxable sale. In the year of the gift, the donor also receives an immediate income tax deduction based on the actuarial value of the remainder interest that is expected to pass to charity. This deduction is governed by Internal Revenue Code Section 170 and is subject to adjusted gross income (AGI) limitations, with any excess deduction eligible to be carried forward for up to five additional tax years (qualified conservation contributions can be carried forward for 15 years).

Importantly, assets transferred to a properly structured CRT are generally removed from the donor’s taxable estate. In 2025, with the lifetime gift and estate tax exemption set at $13.99 million per individual (or $27.98 million for married couples), the CRT can complement larger estate plans by reducing the taxable estate and preserving exemption amounts for other transfers. Because CRTs qualify as tax-exempt entities under IRC Section 664, any capital gains realized within the trust are not taxed to the trust itself but are instead distributed to the income beneficiary over time according to the IRS’s four-tier accounting rules. This allows the donor to spread out the tax liability while potentially reducing overall income tax exposure, depending on how the distributions are structured.

What are some important considerations or limitations of a CRT?

While CRTs offer notable advantages, they also involve trade-offs and limitations that require careful consideration and experienced planning. The structure of a CRT is irrevocable, meaning that once assets are transferred into the trust, the donor permanently relinquishes legal ownership and control over the contributed principal. Although the donor may retain the power to change the charitable remainder beneficiary to another qualified 501(c)(3) organization, the designation of a charitable remainder interest cannot be revoked or withdrawn once the trust is in place.

CRTs also have restrictions on the types of assets that may be contributed. Assets that are encumbered with debt, used for personal purposes (such as a primary residence), or otherwise subject to grantor trust rules may not qualify for CRT treatment and may inadvertently trigger adverse tax consequences. Contributions of such assets could result in the CRT being treated as a grantor trust, which undermines its tax-exempt status and can negate the donor’s anticipated benefits. In addition, contributions that fail to satisfy the 10% remainder requirement (based on Section 7520 actuarial assumptions) will result in the CRT failing to qualify for tax exemption altogether.

Do I receive income from a CRT?

Yes. A CRT is specifically designed to provide an income stream to the donor or another non-charitable beneficiary for life, for the joint lives of the donor and a spouse or other beneficiary, or for a fixed term not to exceed 20 years. This income can be structured in two primary ways: as a fixed dollar amount, in the case of a Charitable Remainder Annuity Trust (CRAT), or as a fixed percentage of the trust’s annually revalued assets, in the case of a Charitable Remainder Unitrust (CRUT). The payout percentage must be between 5% and 50%, and the trust must be designed such that the actuarially determined present value of the charitable remainder interest is at least 10% of the value of the assets initially contributed.

CRT distributions are subject to a four-tier tax treatment hierarchy under IRS rules. The payments are taxed in the following order: first as ordinary income to the extent the trust has earned it, then as capital gains, followed by tax-exempt income, and finally as a non-taxable return of principal. Because of this ordering, distributions may be taxed at higher rates than typical investment income unless the trust is carefully structured to manage the composition of its income over time.

When is a CRT best suited for someone?

A Charitable Remainder Trust (CRT) is particularly well-suited for individuals who hold highly appreciated assets—such as investment real estate, concentrated stock positions, or closely held business interests—and wish to avoid triggering immediate capital gains taxes upon sale. By transferring those assets into a CRT prior to liquidation, donors defer the tax, allowing the full value of the asset to be reinvested within a tax-exempt trust structure. This feature is especially attractive to those approaching retirement who are looking to generate a secure income stream either for themselves or for a spouse or other loved one, while simultaneously reducing the size of their taxable estate.

With the federal lifetime estate and gift tax exemption at $13.99 million per person (or $27.98 million for married couples) in 2025, CRTs also offer an opportunity to make use of these elevated thresholds in coordination with other planning strategies. Individuals considering legacy planning, wealth transfer, or charitable giving in a tax-efficient manner should act now to lock in the current exemptions. Because assets transferred to a CRT are typically removed from the taxable estate and qualify for an income tax deduction based on the value of the charitable remainder interest—calculated using the IRS Section 7520 rate (5.0% for July 2025)—this tool offers a unique combination of capital gains deferral, estate tax reduction, lifetime income, and charitable impact.

What is a nonprofit organization?

A nonprofit organization is a legal entity formed for purposes other than generating profit for its founders, members, or shareholders. Under Internal Revenue Code Section 501(c)(3), qualifying nonprofits must be organized and operated exclusively for one or more recognized exempt purposes—such as charitable, religious, educational, scientific, or literary activities. These organizations must not distribute any portion of their income or assets to private individuals, insiders, or stakeholders, either during operation or upon dissolution. Instead, all net earnings must be reinvested to advance the organization’s mission and serve the public interest.

What are the main tax benefits of forming a nonprofit?

The formation and successful recognition of a nonprofit as a tax-exempt entity can lead to substantial tax advantages. Once granted exemption under Section 501(c)(3) by the IRS—through either Form 1023 or the streamlined Form 1023-EZ—the organization is generally exempt from federal income tax on revenue that is related to its exempt purpose. Many states, including California, also extend tax benefits such as exemptions from state income taxes, sales and use taxes, and property taxes, depending on the type of activities conducted and appropriate filings.

Equally important are the benefits extended to supporters: donations made to a 501(c)(3) public charity are tax-deductible to donors, subject to the limitations of IRC Section 170. For 2025, this means that individuals may deduct charitable contributions up to 60% of their adjusted gross income for gifts of cash, and up to 30% or 20% for certain gifts of appreciated property, depending on the recipient organization and type of asset donated. This deductibility is a major incentive for individuals and corporations to support nonprofits through gifts, grants, and sponsorships.

What are some other advantages of forming a nonprofit?

Beyond tax savings, nonprofits benefit from a variety of structural and reputational advantages that make them highly effective vehicles for mission-driven work. Nonprofits enjoy limited liability protection for their directors, officers, and founders—shielding them personally from debts or lawsuits arising from the organization’s operations. They may also qualify for grant funding from government agencies, foundations, and corporations, which is generally unavailable to for-profit entities. Nonprofits are often eligible for discounted services and software, and many vendors, platforms, and tech companies offer special nonprofit pricing, advertising credits, or donated resources.

In addition, nonprofit status can enhance public trust and accountability. By establishing a governance framework involving a fiduciary board of directors and subjecting the organization to annual public disclosures through Form 990, nonprofits demonstrate transparency that encourages stakeholder confidence and donor engagement. Under state corporate law, nonprofits may also exist in perpetuity, allowing their mission to continue for generations beyond the original founders—without the complications of ownership transfer or sale.

What are the challenges or disadvantages of forming a nonprofit?

Despite these many benefits, forming and sustaining a nonprofit requires careful planning, legal compliance, and ongoing stewardship. The IRS application for tax-exempt recognition, whether via Form 1023 or 1023-EZ, can be complex and time-intensive. Legal and accounting guidance is often necessary to draft a compliant organizing document (such as Articles of Incorporation and Bylaws), address public support tests, and answer detailed questions regarding governance, conflict of interest policies, and financial planning.

Once approved, nonprofits are required to comply with annual filing and disclosure obligations. This includes submitting IRS Form 990, 990-EZ, or 990-N, depending on gross receipts, and keeping current with state-level registrations such as California’s Attorney General Registry of Charitable Trusts. Public financial disclosure rules mean that the organization’s income, expenses, compensation practices, and program activities are open to scrutiny. Noncompliance or failure to file can result in penalties or automatic revocation of tax-exempt status.

Fundraising is both vital and uncertain. Nonprofits are often reliant on grants, donations, and sponsorships, which may fluctuate based on economic conditions or donor trends. Revenue-generating activities unrelated to the exempt mission may be subject to Unrelated Business Income Tax (UBIT), and excessive non-charitable activity can jeopardize exemption altogether. Nonprofits must avoid any political campaign involvement and strictly limit lobbying efforts, as excessive legislative activity may trigger IRS sanctions.

Finally, nonprofit founders must relinquish exclusive control over the organization’s direction. Key decisions are legally required to be made by an independent board of directors that owes fiduciary duties of care and loyalty to the organization—not to any individual founder. Any assets remaining upon dissolution must be transferred to another recognized charity, not returned to donors or insiders. For all these reasons, the nonprofit form—while powerful—is best suited to those with a clear public purpose and a long-term commitment to compliance, transparency, and mission-driven service.

What is a private foundation?

A private foundation is a type of tax-exempt organization recognized under Internal Revenue Code Section 501(c)(3) that is typically established and funded by a single individual, family, or corporation. Unlike public charities, which receive broad-based contributions from the public and are subject to public support tests, private foundations are generally self-funded and governed by a closely held board of trustees or directors. Private foundations often serve as grantmaking entities—disbursing funds to public charities or qualified recipients—but may also engage in direct charitable activities, such as operating scholarship programs or managing their own charitable projects. They offer donors a high level of control and flexibility over how charitable dollars are invested and disbursed over time.

How do private foundations offer tax benefits?

Private foundations provide meaningful tax benefits when structured and managed properly. In 2025, individuals contributing to a private foundation may claim an income tax deduction of up to 30% of their adjusted gross income (AGI) for gifts of cash, and up to 20% of AGI for gifts of appreciated long-term capital gain property. Although these limitations are lower than those available for contributions to public charities (which allow up to 60% of AGI for cash gifts), they remain significant tools for high-net-worth donors seeking to offset income tax obligations while advancing long-term philanthropic goals.

In addition to income tax benefits, contributions to a private foundation are excluded from the donor’s taxable estate. With the lifetime estate and gift tax exemption at $13.99 million per person (or $27.98 million per married couple) in 2025, funding a private foundation during life or at death can help reduce or eliminate federal estate tax exposure. Furthermore, contributions of appreciated assets to a private foundation—such as publicly traded stock or real estate—may avoid immediate capital gains tax, though deductions for such gifts are limited to the donor’s cost basis in some cases (e.g., gifts of closely held stock or real property). For donors seeking a structured, multigenerational platform for charitable giving, the private foundation offers unparalleled governance, allowing families or companies to retain investment oversight and strategic control over charitable distributions.

Are there specific tax rules and regulations for private foundations?

Yes. Private foundations are subject to a distinct and detailed regulatory regime under IRC Sections 4940 through 4945, which imposes operational and financial standards that differ from those applicable to public charities. Among the most significant requirements is the mandatory annual payout: foundations must distribute at least 5% of their average non-charitable-use assets each year for qualifying charitable purposes. Failure to meet this minimum distribution requirement results in penalty taxes under Section 4942.

Private foundations are also subject to a 1.39% excise tax on net investment income, which includes interest, dividends, rents, royalties, and capital gains, minus allowable deductions. Although this rate was once variable, it has been fixed at 1.39% since 2020 and remains unchanged in 2025. The Big Beautiful Bill did not include the House-passed provision to increase this amount.

In addition, foundations are prohibited from engaging in “self-dealing” transactions between the foundation and certain disqualified persons (such as substantial contributors, foundation managers, and their family members). They must avoid jeopardizing investments, excess business holdings, and non-charitable expenditures, including grants to individuals or foreign organizations without proper due diligence. Violations of these rules can trigger punitive excise taxes, often assessed both against the foundation and the individuals involved.

Foundations must file IRS Form 990-PF annually, which discloses detailed financial information, investment income, asset valuations, grant distributions, trustee compensation, and compliance with the 5% distribution rule. This return is publicly accessible and scrutinized by regulators and watchdog organizations. Like other 501(c)(3) entities, private foundations are strictly prohibited from engaging in political campaign activity and may only engage in limited, non-substantial lobbying. Given the scope of regulation, professional legal and accounting support is strongly recommended to ensure ongoing compliance.

What are the main differences between a private foundation and a public charity?

The key differences between private foundations and public charities lie in their funding structure, governance, tax treatment of contributions, and regulatory oversight. Public charities are required to demonstrate broad public support—generally through a diversified donor base—and are subject to a public support test that must be satisfied on a rolling five-year basis. In contrast, private foundations typically rely on contributions from a single source, such as a family or corporate entity, and are thus not required to meet the public support test.

Donations to public charities are generally subject to more favorable income tax deduction limits—up to 60% of AGI for cash gifts and up to 30% for appreciated property—compared to the lower 30%/20% limits for private foundations. Public charities also face fewer restrictions on grantmaking and lobbying activities and are not subject to the private foundation excise tax on investment income.

However, private foundations offer greater control and continuity. Donors and their families can play a direct, long-term role in the foundation’s investment strategy, grantmaking philosophy, and charitable legacy. This makes them particularly appealing to families interested in building multi-generational philanthropy or aligning charitable giving with family values or business objectives. Still, with that control comes significantly more scrutiny and legal obligation. Foundations must carefully avoid conflicts of interest and ensure compliance with detailed IRS rules, while maintaining transparent operations through annual filings and recordkeeping. The more concentrated control and funding base of private foundations necessitates a higher degree of accountability and care, particularly when operating at scale.

What does “wealth transfer tax strategy” mean?

A wealth transfer tax strategy refers to the legal and financial planning techniques used to minimize or eliminate the federal taxes imposed when assets are transferred between individuals, either during life (by gift) or at death (by inheritance). These taxes—known collectively as transfer taxes—can significantly diminish what you ultimately leave to your heirs, reducing the generational impact of your estate. Our focus here is not on income tax planning, but rather on strategies to reduce your exposure to the federal estate and gift tax system, so that more of your legacy passes to your children, grandchildren, or chosen beneficiaries intact.

What are the main types of wealth transfer taxes?

The two principal forms of federal wealth transfer taxation are the gift tax and the estate tax. The gift tax is assessed on lifetime transfers of property made for little or no consideration, while the estate tax applies to the value of your estate at death. Though functionally different, both taxes are unified under a single lifetime exemption—known as the applicable exclusion amount (or basic exclusion amount, depending on which lawyer you ask) —which governs how much you can transfer tax-free in total, whether through lifetime gifts or at death. Any use of the exemption during life reduces the amount remaining available at death.

These taxes operate in parallel with the annual gift tax exclusion, which allows you to make certain gifts every year without using any of your lifetime exemption or triggering a filing requirement. But for clients with high net worth—especially those holding rapidly appreciating assets like real estate, business interests, or concentrated stock—the lifetime exemption is the cornerstone of long-term tax planning.

What is the “applicable exclusion amount”?

The applicable exclusion amount (AEA) is the maximum cumulative value of assets you may transfer during life or at death without incurring federal estate or gift tax. For 2025, the AEA has been adjusted for inflation to $13.99 million per individual, or $27.98 million per married couple with proper planning and portability elections. This means that if your total lifetime taxable gifts and estate value remain under this threshold, you will owe no federal estate or gift tax.

The current exemption levels were temporary under the 2017 Tax Cuts and Jobs Act (TCJA), and the higher exemption was scheduled to sunset on January 1, 2026, reverting to a base of $5 million per individual, adjusted for inflation—likely landing somewhere in the $6.5 to $7 million range. However, the recent passage of the Big Beautiful Bill made the AEA permanent at $15 million, indexed for inflation after 2026.

For gifts to non-U.S. citizen spouses, a special annual exclusion limit of $190,000 applies in 2025—up from $185,000 in 2024.

Will the exclusion amount change in the future?

Yes. Even though the sunsetting increase in the exemption amount was halted with the recent passage of the Big Beautiful Bill, Congress can always change the estate tax exemption (and they will). This is why it is important to do proper estate and gift tax planning today versus putting it off for another year or more based on Congressional action.

When should I start planning for wealth transfer taxes?

If the value of your estate—including your home, investment accounts, retirement funds, life insurance death benefits, and any business or real estate interests— begins to approach whatever the current applicable exclusion amount is (at the moment it’s $13.99 million person in 2025, which will increase to $15 million in 2026) it is time to sit down with an experienced estate planning attorney for a conversation around how to mitigate tax risk. With proper planning, estate and gift taxes can often be eliminated entirely. But prior to that you should still have a comprehensive plan in place to facilitate the orderly and efficient passage of your assets to the next generation.

What strategies are used to reduce wealth transfer taxes?

To reduce or eliminate federal wealth transfer taxes, we rely on a coordinated suite of advanced planning techniques—often described as the “alphabet soup” of estate planning. These strategies are specifically designed to remove appreciating assets from your taxable estate while retaining flexibility, preserving access to income, and protecting family wealth across generations. Popular techniques include Grantor Retained Annuity Trusts (GRATs), which allow you to transfer future appreciation with minimal gift tax exposure, and Intentionally Defective Grantor Trusts (IDGTs), which let you "freeze" asset values by selling them to a trust in exchange for a promissory note, locking in current valuations and shifting growth out of your estate. Spousal Lifetime Access Trusts (SLATs) are often used by married couples to remove wealth from the taxable estate while retaining indirect access to trust assets through the beneficiary spouse. Charitable Remainder Trusts (CRTs) offer a powerful combination of charitable giving, income tax deductions, and estate tax reduction, particularly for clients with highly appreciated assets like real estate or closely held stock.

We also advise clients on how to make full use of the annual gift tax exclusion, which in 2025 allows individuals to gift up to $19,000 per recipient without reducing their lifetime exemption—up to $38,000 per recipient if a married couple elects to split the gift. Over time, these annual exclusions can be used to transfer substantial wealth tax-free. For business owners or families holding real estate and closely held partnerships, we frequently use valuation discounting strategies—such as discounts for lack of marketability or minority interest—when transferring partial interests in family LLCs or limited partnerships. These valuation discounts reduce the reportable value of gifts for tax purposes, enabling you to transfer more economic value while using less of your lifetime exemption.

Finally, we help clients design and implement irrevocable trusts tailored to their specific goals—whether that’s a multi-generational dynasty trust designed to last for 100 years or more, or a more targeted structure such as an Irrevocable Life Insurance Trust (ILIT) used to keep death benefits outside the taxable estate. The current Section 7520 rate—5.0% as of July 2025—impacts the actuarial calculations used in some of these strategies, such as GRATs and CRTs, which must now be structured more carefully to achieve the intended tax leverage.

Does California have an inheritance tax?

No, California does not currently impose an inheritance tax or a state-level estate tax. This means that, unlike some other states, California residents do not face a separate state tax when wealth is transferred at death. However, that doesn’t mean your estate is automatically tax-free. Federal estate taxes may still apply if the total value of your estate exceeds the federal lifetime exemption, which in 2025 is $13.99 million per individual (or $27.98 million per married couple). It’s also worth noting that California’s tax policy can change. There have been periodic legislative efforts to introduce a state estate tax or “wealth tax” in recent years—particularly targeting ultra-high-net-worth estates—though none have passed into law as of mid-2025.

In addition, beneficiaries may still owe income tax on certain inherited assets, depending on the type of property received. For example, while heirs typically receive a step-up in basis on appreciated capital assets (like real estate or stocks), income from tax-deferred retirement accounts such as IRAs or 401(k)s is generally subject to ordinary income tax when withdrawn. And for non-grantor trusts, California imposes its own fiduciary income tax regime based on the residence of trustees and beneficiaries. In short, while there is no California inheritance tax today, tax exposure at the federal level—and through income taxation of inherited assets—still requires careful planning.

Our Approach to Tax Planning

Our practice is grounded in a high-touch, relationship-centered approach to estate and tax planning. We focus on keeping families out of conflict while preserving wealth and legacy for the long term. We recognize that wealth transfer isn’t just about taxes—it’s also about values, relationships, and ensuring the smooth transition of complex assets.

For high-net-worth families, especially those with closely held businesses, trusts, or multigenerational goals, planning becomes even more nuanced. Every client’s situation is different, and we customize our recommendations to fit your unique financial picture. That includes addressing everything from business succession and real estate holdings to dynasty trusts and family governance.

We also believe in the power of collaboration. We work closely with your other advisors—CPAs, financial planners, corporate counsel, and insurance professionals—to ensure your estate and tax strategies are coordinated. This team-based approach reduces the chance of oversights, such as triggering gift tax on transfers of appreciating business assets or missing out on generation-skipping tax opportunities.

Proactive planning often means acting before asset values rise further or tax laws change. Waiting too long can mean missing out on significant savings or losing control over how your wealth is handled after your death.

What is an Estate Plan?

An estate plan is a comprehensive set of legal documents and strategies designed to manage your affairs during your lifetime—especially in the event of incapacity—and to ensure your assets are distributed according to your wishes after death. A well-constructed estate plan typically includes documents such as a Will or Trust, a durable power of attorney, and an advance healthcare directive. It also accounts for guardianship nominations if minor children are involved, and details how your assets should be titled or held to achieve your goals.

At its core, estate planning is not only about distributing property but also about avoiding unnecessary taxes, minimizing court involvement, protecting vulnerable beneficiaries, and maintaining family harmony. A properly coordinated estate plan serves as both a personal safety net and a long-term wealth transfer strategy—preserving your legacy for future generations. The federal estate and gift tax exemption (also known as the Basic Exclusion Amount or BEA) is currently $13.99 million per individual, or $27.98 million per married couple using portability. However, this amount has been made permanent at $15 million for 2026 with the passage of the Big Beautiful Bill. For families with significant wealth, this makes 2025 a critical year to implement gifting strategies and evaluate trust-based solutions that leverage the full exemption while it remains available.

In addition to the lifetime exemption, individuals can also take advantage of the 2025 annual gift tax exclusion, which allows up to $19,000 to be gifted per recipient without incurring gift tax or requiring IRS reporting. Married couples can combine their exclusions and gift up to $38,000 per recipient. For gifts made to a non-U.S. citizen spouse, the annual exclusion amount is $190,000. These exclusion amounts are foundational to wealth transfer planning and can be integrated into long-term strategies that gradually move assets out of the taxable estate while supporting children, grandchildren, or other beneficiaries during your lifetime.

What is a Will?

A Will is a legal document that states how you want your assets distributed after your death and who should be appointed to manage that process (your executor). There are two types of Wills: a complex or traditional Will and a Pourover Will. The Will that people typically think of is the traditional testamentary document that contains all the dispositive provisions regarding who you want to act as Executor and who will get your stuff. A traditional Will can create a testamentary trust that contains all the protective provisions that a revocable trust contains but it still has to go through the Probate process. In California, a Will must go through Probate, which is a court-supervised process that validates the document and oversees the administration of your estate. While necessary in some circumstances, probate is slow, public, and expensive—often taking many months to several years depending on the estate's complexity.

Wills are not useful for tax purposes, either. Proper tax planning has to be done during the testator’s lifetime to effectively remove assets from the estate. If the value of your estate exceeds the federal estate tax exemption ($13.99 million per person in 2025), your estate may be subject to federal estate taxes at rates of up to 40%. Portability between spouses is available to preserve any unused portion of the deceased spouse’s exemption, but this must be affirmatively elected by filing a federal estate tax return (Form 706) after the first spouse’s death—even if no tax is due. Wills may also fall short in addressing multi-generational planning, asset protection, and incapacity, which is why they are often paired with Trusts or replaced by them in more sophisticated plans.

What is a Trust?

A Trust is a flexible estate planning tool that facilitates assets passing to named beneficiaries outside of Probate. Much like Wills, trusts come in two main flavors: Revocable and irrevocable. If you establish a revocable living trust, you retain control over the assets during your lifetime and name a successor trustee to manage them if you become incapacitated or pass away. A Trust avoids the probate process entirely if properly funded during the trustor’s lifetime. California has a Heggstad petition process that will allow the successor trustee to pull assets into the trust if an asset does not make it

A complete Trust-based plan typically includes a “Pourover Will” (to capture any assets inadvertently left out of the Trust), a durable power of attorney, a healthcare directive, a certificate of trust (used to confirm the trust’s existence to third parties), and documents like a general assignment of personal property. For parents, the plan also includes guardian nominations.

Irrevocable trusts can offer powerful tax planning opportunities if drafted correctly. With careful planning, you ca remove assets from your taxable estate, reduce capital gains and income tax exposure, and provide multi-generational protections against creditors and divorces. Even revocable trusts can be drafted with flexibility to “spring” into more protective structures should the exemption decline or if circumstances change. For large estates, irrevocable trusts such as SLATs, ILITs, or generation-skipping dynasty trusts may help preserve wealth for future generations while reducing or eliminating federal estate tax liability.

What is the difference between a revocable trust and an irrevocable trust?

A revocable trust, often referred to as a living trust, is widely considered the most secure and efficient way to avoid probate in California. When a revocable trust is established as the centerpiece of an estate plan, assets are retitled into the trust's name after the document is signed. This critical step ensures that a successor trustee can gain immediate access to your assets if you become incapacitated or pass away, allowing them to seamlessly manage your affairs, provide for your care, and ultimately fulfill your wishes without court intervention. While the initial cost of setting up a revocable trust is generally higher than drafting a simple Will, this expense is far less than the substantial California Probate fees, which can range from 6–10% of the gross estate value when you factor in the attorney’s statutory fee and the executor’s compensation.

For federal estate tax purposes, a revocable trust does not remove assets from your taxable estate. Because you, as the grantor, retain full control over the assets within a revocable trust (you can modify, amend, or revoke it at any time), the IRS considers these assets to still be part of your estate for estate tax calculation purposes. Nonetheless, revocable trusts remain the preferred planning vehicle for incapacity protection, probate avoidance, privacy, and coordinated distribution across multiple jurisdictions or beneficiaries.

On the other hand, an irrevocable trust, once created and funded with assets, generally cannot be altered, amended, or revoked by the grantor. A common example is an Irrevocable Life Insurance Trust (ILIT). While traditionally utilized for estate tax purposes to remove life insurance proceeds from a taxable estate, with the current higher estate tax exclusion, an ILIT can now serve other strategic purposes. For instance, it can be used by married couples to provide a direct gift to children from prior relationships, ensuring they receive an inheritance without having to wait for the second spouse's death. It can also act as a hedge against potential future estate tax issues arising from other complex planning techniques. Another example of an irrevocable trust is a Spousal Lifetime Access Trust (SLAT), which allows one spouse to create an irrevocable trust for the benefit of the other spouse, while still removing assets from the grantor's taxable estate. And there are many, many more.

Assets transferred to an irrevocable trust are generally removed from your taxable estate. This can lead to significant reductions or even elimination of federal estate taxes, as the future appreciation of those assets is also typically excluded from your estate. However, the initial transfer of assets into an irrevocable trust may be considered a taxable gift. While this could potentially trigger gift tax, annual gift tax exclusions and the lifetime gift tax exemption of $13.99 million (as of 2025) can often be utilized to minimize or avoid immediate gift tax liability. With the recent passage of the Big Beautiful Bill, the exemption will be permanent (or at least as permanent as Congress gets) at $15 million, indexed for inflation after 2026.

What is a Charitable Remainder Trust (CRT)?

A Charitable Remainder Trust (CRT) is a sophisticated estate planning tool that allows for the deferral of capital gains tax on the sale of highly appreciated assets (such as real estate, stocks, or businesses) and can provide a structured income stream for the donor or other non-charitable beneficiaries for a specified term or for life depending on the type of CRT chosen. It uniquely incorporates charitable giving into its structure, providing an immediate income tax deduction for the donor in the year the trust is funded. This deduction, which can be carried forward for five years, is calculated based on the present value of the future gift to the charity. CRTs are effective in reducing the size of a taxable estate by removing the contributed assets from it.

The primary tax advantages of a CRT are multifaceted. When appreciated assets are transferred to a CRT and subsequently sold by the trustee, the capital gains tax on that sale is deferred. Donors receive an immediate income tax deduction for the charitable contribution, which can offset current income and be carried forward. The assets contributed to the CRT are removed from the donor's taxable estate, reducing potential federal estate tax liability. The donor also receives a regular income stream from the trust, which can be particularly beneficial for retirement planning. For 2025, valuation of charitable interests is based on the IRS Section 7520 rate, which is 5.0% for July. This rate is crucial for determining the charitable deduction available and the minimum remainder interest that must pass to the qualified charity. CRTs, especially when paired with life insurance strategies, continue to offer flexible solutions that align tax savings with philanthropic intent, making them a popular component of high-net-worth estate plans.

What about nonprofits?

Nonprofit planning refers to the legal, strategic, and organizational process of forming and maintaining a nonprofit entity that serves a public or charitable purpose, typically structured as a nonprofit public benefit corporation under state law. This process involves ensuring compliance with state-specific incorporation requirements—such as filing Articles of Incorporation with appropriate charitable purpose language—and aligning the organization’s

governance, operations, and finances with federal rules for tax-exempt recognition, most commonly under Internal Revenue Code § 501(c)(3). As of 2025, applicants must still file IRS Form 1023 or 1023-EZ, depending on the organization’s size and structure, and must carefully avoid private inurement, excessive benefit transactions, or political campaign activity to retain exempt status.

A well-formed nonprofit exists to fulfill a recognized exempt purpose—whether charitable, educational, scientific, or religious—and must be governed by an independent board of directors that actively oversees the organization’s activities, financial integrity, and mission compliance. It is also subject to rigorous fiduciary duties under both state and federal law, including conflict-of-interest policies and transparency through annual IRS reporting on Form 990 or its variants. In California, additional filings with the Attorney General's Registry of Charitable Trusts and ongoing compliance with the Supervision of Trustees and Fundraisers for Charitable Purposes Act are required. Maintaining public trust and fulfilling fiduciary obligations are not just legal mandates—they are vital to long-term sustainability, fundraising success, and the ability to deliver meaningful public benefit.

Forming Your Business

Why should I create a separate legal entity for my business?

Forming a separate legal entity—such as a Limited Liability Company (LLC), S Corporation, or C Corporation—remains one of the most strategic decisions for new and growing businesses. The most immediate benefit is limited liability protection: by establishing a legal boundary between your business and personal life, your personal assets—like your home, retirement accounts, and personal savings—are generally protected if your business is ever sued or faces financial trouble.

In addition to shielding personal liability, entity formation unlocks tax advantages and strategic flexibility, which have only expanded under the latest 2025 federal tax law changes. For example, pass-through entities like LLCs and S Corps can still benefit from the 20% Qualified Business Income (QBI) deduction under IRC § 199A, with the income phase-out thresholds for 2025 adjusted to $364,200 for joint filers and $182,100 for single filers. The passage of the Big Beautiful Bill retained the deduction at 20% and made the deduction permanent, adding even more value to pass-through structuring.

Newly updated Section 179 rules now allow businesses to deduct up to $2.5 million for qualifying equipment and property, with the deduction phasing out at $4 million—giving small businesses more room to write off investments in machinery, software, vehicles, and improvements. And effective January 19, 2025, 100% bonus depreciation has been restored, meaning you can immediately deduct the full cost of qualifying new and used property placed in service, including certain manufacturing assets through 2032.

Choosing the right entity type also helps businesses establish credibility with customers, banks, and investors, and makes it easier to raise capital, enter into contracts, and develop a recognizable brand. From a long-term perspective, a formal entity structure supports succession planning and allows your business to outlive your personal involvement—whether you're planning to transfer ownership to children, employees, or future partners.

With constantly changing tax rules, like full deductibility of domestic R&D expenses under Section 174, everchanging energy tax credits, and employer-provided childcare credits (now up to 40%, with limits raised from $150,000 to $500,000, and even $600,000 for eligible small businesses with the Big Beautiful Bill), forming an entity isn’t just about risk protection—it’s about maximizing value in today’s increasingly complex tax and regulatory landscape.

What is a registered agent, and why do I need one?

A registered agent is a person or professional service designated to receive legal and government correspondence on behalf of your business, including lawsuits, subpoenas, tax notices, and annual report reminders. Every LLC or corporation is legally required to maintain a registered agent with a physical street address (not a P.O. Box) in the state where it’s formed, and that agent must be available during normal business hours.

Having a registered agent ensures your business never misses critical compliance deadlines or legal service—especially important if you operate in multiple states or work remotely. It also provides a layer of privacy, since the agent's address—rather than your personal or office address—is listed on public filings. With the IRS intensifying compliance enforcement using AI tools and expanding its oversight of 1099 filings, digital transactions, and crypto reporting, it's more important than ever to maintain a reliable point of legal contact.

What is a partnership agreement, and do I need one?

Yes—you absolutely do. A partnership agreement is a foundational document that outlines how your business will function and how major decisions will be made. It specifies ownership percentages, profit and loss allocations, capital contributions, management responsibilities, and what happens in the event of withdrawal, incapacity, or death of a partner. Without it, your business defaults to your state’s general partnership laws, which may divide profits and authority equally—even if that’s not what you intended.

In the wake of recent tax law updates, it’s especially important that your agreement addresses how deductions such as Section 179 expensing, QBI eligibility, and loss allocations will be handled. Notably, the excess business loss limitation for pass-throughs has been adjusted to $313,000 for single filers and $626,000 for joint filers in 2025—so careful planning around how losses flow through to partners is critical to avoid unintended tax consequences.

A clear agreement reduces future disputes, supports long-term growth, and helps protect your personal and professional relationships.

My bank asked for 'formation documents.' What are those?

Formation documents are the official filings that establish your business’s legal existence with the state. For an LLC, this usually means the Articles of Organization, and for a corporation, the Articles of Incorporation. These documents include essential details such as your company’s name, the business structure, your registered agent, and the purpose of your business.

Banks, lenders, and government agencies require these documents to confirm that your business exists legally. You may also be asked for additional documentation, such as an Operating Agreement (for LLCs), Corporate Bylaws (for corporations), or a Certificate of Good Standing to show you’re in compliance with state filing requirements. With 2025 tax credits and depreciation deductions tied to specific types of assets or entity use, maintaining updated and accurate entity paperwork has never been more important for banking, insurance, and tax planning purposes.

How do I get an EIN?

An Employer Identification Number (EIN) is a federal tax ID number issued by the IRS to identify your business for tax purposes. You’ll need an EIN if you plan to hire employees, open a business bank account, file business tax returns, or apply for licenses or permits.

In 2025, you can still obtain your EIN free of charge directly through the IRS EIN Assistant. The process is straightforward—typically requiring your business’s legal name, formation documents, address, and the Social Security Number (or ITIN) of the responsible party. Most EINs are issued immediately upon online application, though paper or international requests may take longer. Applying for an EIN is often one of the first steps after forming your entity, and it’s necessary to take advantage of many of the new 2025 business tax credits and deductions.

Business Succession & Retirement Planning

I’m thinking about retiring. What should I be thinking about for my business?

Retirement for a business owner involves far more than accumulating personal savings—it’s about ensuring that your business, which likely represents one of your largest assets, is transitioned in a way that preserves its value, minimizes taxes, and reflects your long-term goals. The cornerstone of any exit strategy is a well-structured succession plan. Whether you intend to transfer the business to children, sell it to a trusted employee, or prepare it for an outside sale, each path brings a unique set of tax, legal, and personal planning implications. The earlier you begin, the more options you'll have—and the more leverage you’ll gain when negotiating terms or preparing for unforeseen changes in the market or your health.

A proper succession plan is rarely accomplished alone. Assembling a trusted advisory team—which typically includes a business attorney, CPA, financial advisor, and estate planner—is critical. These professionals work together to evaluate the structure of your business, assess current entity classification, and coordinate strategies to minimize exposure to capital gains taxes, estate taxes, and depreciation recapture. For example, if your business holds substantial appreciated assets or intellectual property, transitioning ownership through a grantor trust, intentionally defective grantor trust (IDGT), or a family limited partnership (FLP) may help achieve both tax efficiency and control. If you're planning a third-party sale, careful valuation, earn-out structuring, and entity conversion (e.g., from an S Corporation to an LLC or vice versa) must be reviewed for hidden tax traps under current federal and state law.

Your estate plan must be fully integrated with your business exit strategy. If the goal is to pass the company to family members, your will or trust documents should clearly reflect who inherits ownership interests and under what conditions. Revocable living trusts can help you avoid probate and ensure continuity, while irrevocable trusts—such as dynasty trusts or SLATs—can shield business interests from estate taxes and creditors. In light of the 2025 federal lifetime estate and gift tax exemption of $13.99 million per person (or $27.98 million per married couple), some business owners may wish to make strategic lifetime gifts of business interests while current exemption levels remain high—before they are scheduled to revert to nearly half on January 1, 2026.

Your business entity itself may also need to be restructured in anticipation of succession. For example, changing from an S Corporation to an LLC or C Corporation in advance of a sale may help with retained earnings strategies, stock redemption plans, or alignment with Section 1202 Qualified Small Business Stock (QSBS) benefits, if applicable. These conversions must be timed and executed with caution, as improper handling can trigger immediate tax consequences.

In tandem with the succession plan, many owners approaching retirement begin maximizing retirement plan contributions in their final high-income years. Depending on your entity type and cash flow, you may benefit from establishing or funding a Solo 401(k), SEP IRA, or even a defined benefit pension plan. These plans allow for substantial tax-deferred contributions—up to $69,000 or more in 2025 for Solo 401(k)s (with catch-up), and significantly more for defined benefit plans, depending on age and income level. For business owners nearing exit, these plans not only provide a valuable retirement nest egg but can also reduce the business’s taxable income, increasing its net cash flow in the final years before sale or transition.

Finally, don’t overlook buy-sell agreements, key person insurance, and internal buyout strategies like Employee Stock Ownership Plans (ESOPs). These tools can provide liquidity, ensure smooth control shifts, and protect the value of your business for both you and your successors.

In short, retiring from your business is a complex but rewarding milestone. With thoughtful planning—rooted in a coordinated approach across your legal, tax, and financial advisory teams—you can protect what you’ve built, achieve your exit goals, and create a legacy that endures.

What We Do and How We Work

Our firm helps clients create thoughtful business and estate plans that protect their families and their companies. We aim to be your trusted advisor—not just for documents, but for decisions. We look at the whole picture: how your business, your personal wealth, your family, and your taxes all fit together.

When it comes to advanced estate and business planning, we help you structure your affairs to avoid conflict, reduce unnecessary taxes, and ensure smooth transitions. Whether that means creating a buy-sell agreement, updating your operating agreement, restructuring your business before a sale, or preparing for generational wealth transfer, we bring experience, clarity, and strategy to the table.

We also incorporate family dynamics into the planning process. If your business will stay in the family, we help you put protections in place—sometimes using dynasty provisions or trusts—to ensure the wealth is preserved and managed responsibly for children and grandchildren. This helps protect against lawsuits, divorces, poor financial decisions, or family disagreements that can arise after you're gone.