Help High-Net-Worth Clients Capitalize on Important Tax Break

This is an election year so clients will be inundated with partisan bickering and critiques of the candidates’ various policy initiatives. That includes the Tax Cuts and Jobs Act (TCJA), colloquially known as the “Trump tax cuts.”

In an effort to avoid partisan discourse, one side believes the TCJA was a tax cut for the rich, but data indicate many other tax brackets benefited. For advisors, it’s worth noting that the TJCA could sunset in 2025, meaning now is an appropriate to capitalize on some of the law’s provisions before they potentially disappear.

One of those is the provision that allows clients to enjoy estate tax exemptions and make lifetime gifts of up to $13.61 million per person. Obviously, that’s a number for ultra-high-net-worth clients, but $13.61 million is the cap, meaning the provision, which is in place for the remainder of this year, is relevant to a broad swatch of clients.

That doesn’t mean it’ll be around forever. It could be gone as soon as the start of 2026 when the exemption would be slashed to $5 million per person, meaning now is as good a time as any for advisors to discuss with clients taking advantage of this perk as soon as possible.

Why It Matters

Broadly speaking, it’s not a stretch to say that clients, regardless of political persuasion, want to capitalize on legal tax breaks when available. Add to that, making tax advice part of the equation enhances a practice’s status as holistic and rich in value-add opportunities.

Specific to the aforementioned TJCA provision, it’s worth getting on that ball now because if it goes away and the client with an estate or lifetime gifting that exceeds the cap that goes into place in January 2026 could be subject to a tax hit of up to 40%. No client wants that and that is to say an ounce of prevention is worth a pound of cure.

“It’s possible that new legislation could extend the estate and gift tax exemption. But there’s certainly no guarantee—and clients who decide to wait it out may lose a once-in-a-lifetime opportunity to save on estate taxes. By educating clients on this upcoming change, you’ll do them a tremendous service and give them yet another reason to continue working with you in the years to come.

An easy step to take now is to encourage clients to max out on the annual gift limit of $18,000 or $36,000 for married couples.

More Steps to Consider

Advisors can also help clients establish family limited partnerships (FLPs) or family limited liability corporations (FLLCs).

“These entities allow parents to transfer wealth to their children while still retaining control over the transferred assets. FLPs and LLCs can offer significant valuation discounts, reducing the value of the taxable estate,” adds Nationwide.

A charitable remainder trust (CRT) could be an idea for wealthy clients because those trusts actually provide income to the client and when the trust expires, the assets flow to a charity, providing addition tax benefits. For clients with real estate holdings, even if it’s one or two homes, a qualified personal residence trust (QPRT) could make sense.

“A QPRT allows individuals to transfer their primary residence or vacation home to an irrevocable trust—while retaining the right to live in it for a certain period. After this period, the residence passes to the trust beneficiaries,” concludes Nationwide.

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