Managing Attorney
The most dangerous myth in estate planning right now is that the latest federal tax changes turned estate tax into a non-issue. That false sense of security is exactly how families lose millions, not because the rules are harsh, but because they let inertia do the damage. For 2025, the federal basic exclusion amount (the shield against estate and gift tax) is $13,990,000 per person, with an annual gift exclusion of $19,000 per recipient. Beginning January 1, 2026, recent legislation sets a higher, indexed baseline exemption and eliminates the old “cliff” that would have cut the amount in half after 2025. On the surface, that sounds like a victory. In practice, it lulls people to sleep while a 40% federal estate tax rate waits above the exemption and ordinary administrative missteps quietly erode what their families keep. “Permanent” in tax law doesn’t mean forever; it means “until Congress changes its mind.” Planning that assumes nothing will ever shift again is not planning, it’s wishful thinking.
Start with what you can control right now. If you’re tempted to celebrate the headline numbers and postpone action, understand what delay really does. Every month that appreciating assets sit inside your taxable estate is a month you volunteer tomorrow’s growth for inclusion in the federal tax base. You’re not simply “deciding to wait.” You’re deciding that the spread between an asset’s value today and its value five, ten, or fifteen years from now should compound inside the part of your balance sheet that the government will add up when you die. The families who get this right do the opposite: they export growth. They move the future appreciation engine out of their estates while they’re alive, healthy, and able to sign documents. They stop hoping the calendar will protect them and start using the calendar to their advantage.
The cleanest way to export growth is lifetime gifting of assets with strong upside – closely held business interests, pre-liquidity company stock, development-stage real estate, concentrated public equity, and other positions with a believable ramp. When you shift those assets out today, you’re not just “using the exemption.” You’re resetting who gets the growth from this day forward. If a business that’s worth $10 million now becomes a $25 million success five years from today, the $15 million of upside either blossoms inside your taxable estate or outside it. There is no neutral middle. People tell themselves they will “get to it after the next raise” or “once the audit is done.” That’s how compounding defeats casual planners.
Trusts are where serious families separate themselves from spectators, because trusts let you move ownership without surrendering all flexibility. A Spousal Lifetime Access Trust (SLAT) is a prime example. One spouse transfers assets into an irrevocable trust for the other spouse’s benefit, pushing both the principal and its future growth outside the transferor’s taxable estate. The result is deceptively simple: your family keeps access to distributions if needed, but the appreciation engine is working for heirs instead of your estate tax calculation. The risk that kills SLATs isn’t obscure case law. It’s delay. If you wait until a liquidity event to begin, valuations have already surged and discounts are harder to support; if both spouses intend to create SLATs and you procrastinate, you make it harder to avoid the reciprocal-trust problem because timing and terms end up looking too similar. The legal hurdles are navigable; procrastination is not.
Sales to Intentionally Defective Grantor Trusts (IDGTs) remain as effective as ever, and the logic is straightforward. You sell appreciating assets to a grantor trust in exchange for a promissory note, properly valued and documented. Because the trust is “defective” for income-tax purposes, you (the grantor) pay its income tax each year. That means your wealth continues to erode inside your estate (via the income taxes you pay) while the trust’s assets compound for your heirs. It feels almost too elegant: each tax check you write is functionally an additional transfer to the trust that avoids gift tax. The hard part isn’t the structure; it’s the will to execute before values climb further. If your assets have believable double-digit upside and you’re sitting on them inside your estate because you heard the exemption is “permanent,” understand that you’re choosing the most expensive place for that upside to land.
Volatility makes most investors nervous. In estate planning, volatility can be harvested. A Grantor Retained Annuity Trust (GRAT) lets you transfer an asset to a trust in exchange for a fixed annuity stream; any return above the IRS hurdle rate spills to your beneficiaries at the end of the term with minimal gift-tax cost. The tactic that often works best isn’t a single, long GRAT; it’s a series of short, rolling GRATs around volatile assets that occasionally spike. When a position pops, that burst of value lands outside your estate instead of inflating the portion subject to estate tax. This is not theory, it is arithmetic. If you own high-beta positions and you’re just holding them in your own name because the exemption headline looks friendly, you’re letting market noise become a tax bill.
Charitable split-interest strategies deserved more attention even before the latest law changes; now they’re indispensable for people who care about both philanthropy and family wealth. A Charitable Lead Annuity Trust (CLAT) pays a fixed annuity to charity for a term, then sends the remainder to your family. Because the charity’s right to payments reduces the taxable value of the remainder when you create the trust, a CLAT can deliver a surprisingly large family benefit if the assets inside outperform the discount assumptions. A Charitable Remainder Unitrust (CRUT) flips the structure: it pays you (or other named beneficiaries) an income stream for life or a term, then passes the remainder to charity. Either way, the transfer-tax math can be compelling when used deliberately, especially for low-basis assets you want to reposition. The worst mistake you can make is deciding that generous exemptions make these “overkill.” They make them more potent, not less necessary.
Now to the tool that far too many high-net-worth families mention but too few implement correctly: the Family Limited Partnership (FLP). Properly designed, an FLP is not a gimmick; it’s a disciplined structure that can improve governance, separate control from economics, and, in the right circumstances, support valuation discounts for lack of control and lack of marketability when minority or non-voting interests are transferred. Those discounts matter because they stretch your exemption further. Transferring a 30% non-voting interest in a well-documented FLP that holds operating businesses or investment assets is not the same as transferring 30% of a brokerage account in your name. Courts and the IRS have repeatedly shown that they will respect discounts where there is a bona fide, business-oriented partnership, real records, real capital accounts, real distributions consistent with agreements, and behaviors that match the paperwork. They have also shown (with equal clarity) that they will collapse flimsy partnerships that are created on the eve of death, commingled with personal spending, or run like someone’s private piggy bank. If you want an FLP to help, treat it like a real enterprise: set it up early, follow the operating agreement, document contributions and distributions, and don’t use it as your checking account. The fear factor here is simple: if you plan an FLP but run it casually, you won’t just lose discounts; you could invite inclusion of the underlying assets back into your estate under “retained interest” principles. A well-run FLP is a shield. A sloppy one is a red flag.
Insurance deserves a hard look as well, not as a product pitch but as liquidity engineering. If you own a policy outright, the death benefit is typically included in your taxable estate. An Irrevocable Life Insurance Trust (ILIT) changes that equation. When the ILIT owns the policy, the proceeds are outside your estate but available to your family to pay tax, equalize inheritances, or buy out business interests without panic selling. The traps are procedural, which is why so many families step in them. Move an existing policy to an ILIT without minding the three-year look-back and die within that period, and the proceeds may still be pulled back into your estate. Fund premiums without proper Crummey notices and you can undermine the very exclusions you’re relying on. None of that is complicated, but all of it requires discipline. The false comfort of a high exemption will not save you from bad process.
Portability, the ability of a surviving spouse to “port” a deceased spouse’s unused exclusion, sounds forgiving in theory and is ruthless in practice. It only works if someone files a timely federal estate tax return (Form 706) to elect it, even when no tax is due. The deadline is nine months from death, with a six-month extension if requested on time. Families lose millions by assuming that because no check is owed, no return is required. By the time the mistake is discovered (often years later) facts have changed, assets have grown, and the survivor’s own exemption has been burned down by lifetime transfers that could have been sheltered by the deceased spouse’s unused amount. The paperwork takes time, the valuations require attention, and the election must be made deliberately. If you take nothing else from this, take this: put a portability election on your checklist the moment a spouse dies. The law’s generosity is meaningless if you don’t ask for it properly.
Even if you never make another gift, you can still change the slope of your estate by freezing your own upside. Preferred-interest recapitalizations, for example, let you hold a preferred interest with a defined return while shifting common-equity growth to trusts for descendants. Self-canceling installment notes and private annuities can exchange uncertain appreciation for known payments that you control. These aren’t exotic maneuvers for the ultra-wealthy; they are pragmatic ways to decide where compounding happens. If your balance sheet continues to be the growth engine, your estate continues to be the tax magnet. A freeze flips that dynamic.
None of these strategies deliver their potential without documents that anticipate change. Modern trusts should include swap or substitution powers so you can move assets in and out as circumstances shift; they should authorize decanting and name a trust protector with targeted powers so you can adjust to new law without starting over; they should use distribution standards that preserve asset protection and avoid inadvertently pulling trust assets back into your estate. Governance is not the appendix to your plan. It is the plan. The biggest, quietest risk of a “permanent” exemption world is that families let their drafting standards slide, confident that big numbers cure sloppiness. They don’t.
So, what should you actually do between now and early 2026? Use your 2025 annual exclusions before December 31. Identify the assets most likely to sprint over the next market cycle and shift them to the right structures now. If a SLAT makes sense for your marriage and cash-flow needs, build it well and fund it while valuations are compelling. If an IDGT sale fits your asset profile, get your valuation work and note terms in order before the next up-round. If volatility is your reality, capture it with rolling GRATs. If insurance is part of the plan, own it in an ILIT and run the administration like a professional. If an FLP belongs in your world, form it early, operate it like a bona fide enterprise, and document everything—because the value of the discounts you want depends on the reality of the partnership you run. And if the unthinkable happens and a spouse dies, treat portability like a race against the clock and file the election on time. None of this requires heroics. All of it requires intent.
The bottom line is not complicated: higher, indexed exemptions reduce pressure, but they don’t repeal the arithmetic of compounding, the 40% rate above the line, or the risks created by delay. The government is patient. Markets are relentless. Paperwork is unforgiving. You can either let those forces work against you or bend them in your favor while the law is generous and you are in a position to act. “Permanent” is not the same as “safe.” The window didn’t slam shut at the end of 2025, but it didn’t become a picture frame either. It’s still a window. Use it while it’s open.