As we enter 2025, proactive tax planning has never been more crucial. With potential changes in tax policy on the horizon, individuals and business owners need to evaluate their wealth management strategies to minimize tax liabilities and secure their financial future. In a recent HUB International Tax Optimization Webinar, experts Jeff Sharp and Brett Berg provided key insights into tax-efficient wealth preservation strategies. Here’s what you need to know.
Understanding the 2025 Tax Landscape
Tax policies continue to evolve, influenced by shifting political and economic factors. One of the biggest areas of focus in 2025 is the potential adjustment to estate, gift, and Generation-Skipping Transfer (GST) tax exemptions. Currently, the exemption level stands at approximately $14 million per individual (or $28 million per couple), but uncertainty looms regarding future thresholds. While temporary extensions are possible, exemption levels may revert to lower pre-Tax Cuts and Jobs Act (TCJA) amounts.
Wealth Transfer Planning in 2025
Given the possibility of reduced exemptions, high-net-worth individuals should consider strategic gifting and trust planning to take advantage of current thresholds. Some key strategies include:
- Spousal Lifetime Access Trusts (SLATs): Designed to optimize tax benefits while maintaining access to wealth.
- Intentionally Defective Grantor Trusts (IDGTs): These allow grantors to pay income taxes on trust earnings, effectively reducing taxable estate value.
- Grantor Retained Annuity Trusts (GRATs): A method for transferring appreciating assets with minimal gift tax exposure.
- Generation-Skipping Trust (GST) Planning: Helps preserve wealth by bypassing estate taxes for a generation.
Proper valuation planning, including obtaining qualified appraisals and structuring gifts or loans appropriately, is crucial to maximizing these strategies.
The Role of Life Insurance in Wealth Preservation
Life insurance remains a critical tool for estate and tax planning. It provides liquidity to cover estate taxes, protects assets, and ensures a tax-efficient wealth transfer. Tax advantages of life insurance include:
- Income tax-free death benefits (IRC §101(a))
- Tax-deferred growth of cash value (IRC §7702)
- Favorable policy loan and withdrawal treatments (IRC §72, §7702A)
- Protection for chronic and terminal illnesses (IRC §101(g))
Incorporating life insurance into your overall estate plan can help safeguard your wealth while optimizing tax efficiencies.
Expanding Your Tax Planning Toolkit
Beyond estate planning, additional tax-efficient strategies can help enhance long-term wealth preservation. These include:
- Business Succession Planning: Ensuring a smooth transition of ownership with minimal tax impact.
- Charitable Giving Strategies: Utilizing donor-advised funds or charitable trusts to maximize tax deductions while supporting philanthropic goals.
- Tax-Efficient Investments: Implementing tax-managed portfolios to minimize capital gains and optimize after-tax returns.
Take Proactive Steps Now
With potential tax changes ahead, early action is essential. By working with financial, legal, and tax professionals, individuals can establish flexible estate structures that adapt to future regulations while maximizing current opportunities.
Whether you’re looking to optimize your wealth transfer, protect your assets, or explore innovative tax planning solutions, now is the time to act. To learn more about tax optimization strategies, contact HUB Advisor for guidance.
Important Note
Jeff Sharp is registered with HUB Investment Advisors, an SEC-registered investment advisor. Brett Berg is with Prudential Financial. Prudential Financial and HUB International are not affiliated. Please scroll down to view additional disclosures about HUB Retirement and Private Wealth.
