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End of Year Estate Planning Strategies

End of Year Estate Planning Strategies

Tax and estate planning should not be a one-time process. Instead, you should take some time each year to ensure that your assets are protected, and the potential for estate taxes is minimal. Unfortunately, many people do not consider how leaving assets to their loved ones will affect them from a tax standpoint, so you should take that into consideration as well. Taking a close look at your estate plan annually can alleviate potential problems down the road.


The end of each year is a good time to reevaluate your estate plan. One of the best ways to assure a clean transition of your assets after your death is to be sure that your assets are not in your estate when you pass. Now is a great time to consider the assets you may have purchased in the previous year and make sure they are titled properly. Use the following tips to get you started.

Consider setting up a trust.

Trusts can be useful estate planning tools because they allow you to remove assets from your personal name and place them into the trust. This asset removal process can cut reduce your personal exposure to lawsuits, increase your availability for Medicare, and in some cases cut down (or eliminate) your overall estate tax obligation eliminate estate taxes.

An irrevocable trust, one that cannot be canceled, is a tool often used to transfer assets from your estate to the trust. Then, the trust can provide you with income while you are living or provide income to another individual, even after you have passed. This estate planning tool does limit your ability to move assets to some degree, but you can still often use the asset as you wish while it is in the trust. Trusts can be tailored to meet your unique needs.

Other types of commonly used trusts include:

  • Bypass Trust (also known as a credit shelter trust or family trust) allows you to leave your assets to the trust and not to your loved one directly. Usually, the amount left to a loved one is just under the amount that would trigger the estate tax.
  • Irrevocable Life Insurance Trust (ILIT) is a tool that allows you to remove your life insurance proceeds from your estate. You create a specific trust just for your life insurance proceeds and set up your heirs as beneficiaries.
  • Qualified Personal Residence Trust (QPRT) will allow you to place your home into a separate trust. If the grantor passes before the term of the trust has expired, then the home goes back into the estate. If the grantor outlives the term, however, the trust owns the home, and the grantor will rent the home from the trust, often resulting in more money for heirs.
  • Intentionally Defective Grantor Trust (IDGT) allows the grantor to place low-valued business shares into the trust. The shares can then grow and pass to heirs tax-free.
  • Generation-Skipping Trust (also known as dynasty trusts) permit the grantor to set up a trust for the benefit of beneficiaries that are at least two generations younger. Typically, grandparents will set up this type of trust for their grandchildren.

There may be additional trust options available based on your unique financial situation or desires for creative planning.

Gifting Regularly

Gifts to others are an excellent way to move assets tax-free so that they never affect the probate or estate administration process. You can give away up to $14,000 to each individual, each year without triggering a potential gift tax. In 2016, the total lifetime gift amount was also increased to $5.45 million per person, which means that a married couple can gift $10.9 million and still avoid federal estate and gift taxes. Annual gifts are a great way to whittle down your estate to avoid estate taxes.


Gifts to charity may also have the added bonus of decreasing current income taxes as well. Charitable gift-giving is generally limited to 50 percent of your income from an income tax standpoint in most cases, but 20 and 30 percent limitations may apply as well.

Other Quick End-of-the-Year Tips

You may also want to consider using the following tips at the end of the year.

  • Pay your January mortgage a few days early so the mortgage interest is deducible in 2016.
  • Consider converting your traditional retirement account to a Roth retirement account.
  • Pre-pay business expenses in December.
  • Defer bonus income or independent contractor receipts to next year if possible.
  • Increase gifts to charity the last few days of the year.
  • Set up a 529 Plan for educational expenses for children or grandchildren.
  • Consider forming a corporate entity to help with tax and estate planning in the future.

You can find other tips in our extensive video library. Sign up for a free membership.

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