Legacy Planning, Once Removed

There is a lot of talk about fostering the right “mindset” to facilitate personal growth and fulfilment. The most popular seems to be a “growth mindset,” compared to a “fixed mindset.” This episode explores a related concept — that of a “legacy mindset.” The legacy mindset is a mindset directed at an individual’s legacy or effect on people, institutions, or ideas. This episode considers the value of a legacy mindset, and it provides some thoughts on how to identify and develop your legacy mindset — not just upon death, but during life.

Estate plans and lifetime gifts are often based on discretionary distributions to beneficiaries. But famed investor Warren Buffett and movie star Ashton Kutcher have suggested an alternative, in which beneficiaries do not receive gifts – instead, those beneficiaries can take out a loan from a trust, or can ask a trust to make an investment in a beneficiary’s venture. 

This episode explores this concept, called a “family bank” or “family venture capital fund.” This structure can be used to facilitate loans and investments for a beneficiary, which can serve the settlor’s overall purpose. 

This episode highlights the advantages of a family bank and lays out opportunities to structure the entity for proper governance, investment philosophy and asset protection.

An estate plan often involves establishing an irrevocable trust for certain beneficiaries. But when circumstances change, clients wonder if the benefits no longer justify the costs of keeping the assets in a trust. Before moving to terminate a trust, however, parties should consider carefully whether the purposes of the trust would best be served through termination, if termination is permitted, what might be some available alternatives and how to move forward to make sure all parties are informed and protected. This episode explores potential options and pitfalls for terminating a trust, including adverse tax issues, and lays out some options as parties consider the future.

Many clients ask whether and when to share the estate plan with beneficiaries. Even after a client’s death, during the administration of an estate or trust, executors and trustees often ask the same questions about how much to share with beneficiaries. Communicating this estate plan can have important practical, moral and legal benefits in making sure the plan is carried out in the right way while fostering family unity and reducing tension or disagreement.

In this episode, Steve draws on the lessons from Warren Buffett’s 2024 letter to the shareholders of Berkshire Hathaway in which Buffett provides wisdom on the question of sharing the estate plan with beneficiaries.

On this podcast, Steve often explores ways to establish and administer trusts to facilitate productive and healthy beneficiaries. This episode explores a particular structure to further this goal: a “beneficiary well-being trust,” now authorized under Delaware law. 

A beneficiary well-being trust authorizes, and could require, the trustee to provide programs for the beneficiary regarding any number of subjects, including financial literacy, investments, mental health, and family history and legacy. The episode also delves into ways trusts can serve these important goals — now and after a settlor’s gift or the settlor’s passing.

There are many ways for a client to incorporate charitable giving into planning, during life and upon death. That charitable giving can be a significant part of the client’s legacy, and it can result in tax advantages.

Many of the exemptions that apply for gift, estate and generation-skipping transfer tax are adjusted for inflation each year. In this episode, Murphy will review those exemptions and the adjustments for inflation in 2025 and discuss some strategies for efficient use of those exemptions in 2025.

There are many ways for a client to incorporate charitable giving into planning, during life and upon death. That charitable giving can be a significant part of the client’s legacy, and it can result in tax advantages.

In a prior episode, Murphy discussed outright gifts and gift agreements. But some clients are not ready to decide which charities to benefit, nor when and how. For those clients, a donor-advised fund (DAF) might be a good option. In a DAF, the client transfers funds to a fund within a public charity, which might be part of a community foundation or financial institution.

A DAF can offer flexibility and simplicity for the donor. But there are some limitations to a DAF that donors should keep in mind as they consider which charitable vehicle to use. On this episode, McGuireWoods attorney Hunter Glenn discusses the advantages and limitations of this popular strategy.

Many clients ask about generation-skipping planning, or dynastic planning – ways to benefit future generations in a tax-efficient way.

This episode reminds listeners of the scheduled “sunset” of the GST tax exemption at the end of 2025 and steps to consider in light of those changes in the law. Donors, beneficiaries and trustees should take this opportunity to make sure all their records are complete regarding the GST tax status of any trusts. Steve recently wrote about these concepts in the ACTEC Law Journal and in a shorter essay in the journal Trusts & Estates.

This information will be critical when needed, which might be years from now. Although this information might be hard to track down, it will only get more difficult to collect later.

A significant change in tax law is scheduled to occur at the end of 2025: effective January 1, 2026, the estate, gift and generation-skipping transfer tax exemptions, currently $10 million per person (to be indexed for inflation), are scheduled to be cut in half, to $5 million (to be indexed for inflation). Starting in 2026, the ability for individuals to make tax-free gifts is scheduled to effectively be cut in half.  

Many clients are concerned about this scheduled change in the law, and they are considering whether and how to take advantage of current law while they can. This episode provides a brief summary of the scheduled change in the law, some potential solutions, and some disadvantages or pitfalls to keep in mind. As Steve summarizes, it is best to start that conversation now, well in advance of the 2025 deadline.

Clients often ask about ways to incorporate charitable giving into their planning, during life and upon death. Charitable giving can be an important part of the client’s legacy and can have tax advantages as well. There are a number of strategies, but the simplest option is as an outright gift. But outright gifts might be simple to a fault — once the funds are in the charity’s hands, the donor might not have any ability to question the use of the funds, including if the charity dissolves.

This episode explores the recent case of Derblom v. Archdiocese of Hartford that addressed a gift to a school that later closed.

If the donor is concerned about use and oversight of the gift after it is made, a gift agreement can be a helpful tool. This episode provides some thoughts on how to use a gift agreement to carry out the donor’s wishes.