ANDREA BROUGHTON
0:00 – Good morning everyone. Thank you very much for joining us. Stephanie and I spent a lot of time working with families on estate and wealth transfer planning. And what we wanted to do today is make this topic a little more practical. Estate planning can get complicated very quickly. There are lots of acronyms and different types of trusts. Our goal today is not to turn everyone into an estate planning expert.
0:22 – It is really to help you understand the questions you should be asking, some of the strategies that are available, and how all of these pieces can work together. And one thing we hope you take away today is that good estate planning is about much more than avoiding estate taxes. We’re going to start with the basics and why estate planning matters. Then we’ll talk about some of the wealth transfer strategies we are using with families today.
0:44 – We’ll bring those concepts together through a case study, and then Stephanie will spend some time on trusts, trustees and family governance. Why is estate planning important? When people hear estate planning, they often immediately think estate taxes. But taxes are really just one piece for almost everyone, regardless of net worth.
1:05 – Estate planning starts with making sure the right people can make financial and healthcare decisions if you can’t, making sure assets go where you intend, choosing the right people to carry out your wishes, and protecting the people you leave behind. For families with greater wealth, we layer on to that tax planning, asset protection, philanthropy and increasingly important, preparing the next generation.
1:26 – So even if you are nowhere near the federal estate tax exemption, you still need an estate plan. I like to think about estate planning as starting with the basics and then moving across the spectrum as your situation becomes more complex. We start on the left with the foundational documents that virtually everyone should have in place: wills, powers of attorney, healthcare directives, and making sure beneficiary designations are coordinated with the overall plan.
1:54 – Other considerations when putting that basic estate plan together include how assets are titled, who should serve in the various roles, and how and when you ultimately want assets distributed to your beneficiaries. Then, as wealth and complexity increases, we move further across the spectrum into more advanced planning strategies, including irrevocable trusts, GRATs, SLATs, charitable trusts and other techniques designed to transfer wealth and potentially reduce estate taxes.
2:22 – And if there are liability or asset protection concerns, there are additional strategies that can be considered, such as asset protection trusts. The important point is that you start with the basics and then continue adding the appropriate layers as your needs and circumstances become more complex. Now let’s move from the estate plan itself to some of the strategies available for actually transferring wealth.
2:49 – The estate planning environment has changed significantly over the last several years. For 2026, the federal estate and gift tax exemption is $15 million per person. So $30 million for a married couple. Importantly, under current law that higher exemption is no longer scheduled to sunset the way we were expecting just a couple of years ago.
3:09 – The exemption is also indexed for inflation. So we would expect the $15 million amount to increase over time. If your estate exceeds the available exemption, the federal estate tax rate is 40%. So for larger estates, the potential tax exposure can become significant very quickly. But I would not interpret the higher exemption to mean planning is less important. For families approaching or exceeding those numbers,
3:33 – future appreciation can push an estate well above the exemption. For example, a $20 million estate growing at 6% roughly doubles in twelve years. So we shouldn’t only ask what your estate is worth today. We should ask what it could be worth ten, fifteen or twenty years from now. The federal estate tax isn’t the only consideration. Depending on where you live or own property,
3:58 – state estate or inheritance taxes can come into play, sometimes at significantly lower exemption levels. For those of us in Virginia, we currently do not have a Virginia estate or inheritance tax, but this becomes particularly important for people who live in states with estate taxes or have residences or properties in multiple states.
4:19 – We’re going to focus on federal estate taxes for this discussion. I like to divide the strategies we’re about to discuss into three broad buckets. First, relatively simple strategies such as annual gifts and family loans. These tend to be lower risk and provide more flexibility, so you can adjust what you’re doing as your family’s financial situation or goals change.
4:41 – Then we move into trust and other more advanced strategies that allow you to transfer wealth, maximize the use of your lifetime exemption, and shift future appreciation out of your estate. These strategies can be very powerful, but they also tend to be more permanent. So you want to be thoughtful about how much you transfer and what flexibility you may be giving up.
5:03 – And finally, we have entities and charitable planning which can provide additional opportunities depending on your assets and your goals. The important point is that there isn’t one best estate planning strategy. The right answer depends on what you’re trying to accomplish. Let’s start with one of the simplest strategies, annual gifting. In 2026, you can give $19,000 annually to as many people as you would like without using your lifetime gift tax exemption.
5:30 – A married couple can effectively give $38,000 per recipient if the requirements for gift splitting are met. For someone with several children and grandchildren, those annual gifts can add up very quickly and you don’t necessarily have to give the money outright. We frequently use annual gifts to fund trusts for children or grandchildren.
5:51 – This is a good example of how powerful annual gifting can become over time. In this example, grandparents begin gifting $19,000 a year to a grandchild at birth and continue for eighteen years. Over that period, they made total gifts of $342,000. But assuming a hypothetical 6% annual return, those gifts could grow to almost $587,000 by the time the grandchild turns eighteen.
6:17 – So you’ve not only transferred the $342,000 that was gifted, you’ve also shifted almost $245,000 of growth out of the grandparents estate. And that’s really the benefit I want to highlight. The earlier you start, the more opportunity there is for that future appreciation to occur outside of your estate. It’s a relatively simple strategy, but when you do it consistently over time, it can become a meaningful wealth transfer tool.
6:45 – Another strategy we use quite a bit is an intrafamily loan. This can be particularly attractive when parents want to help a child today, but don’t necessarily want to make a gift. The concept is fairly straightforward. The parent lends the money, the child signs a promissory note and pays interest based on the applicable federal rate. One advantage is that the child gets access to the capital today, whether that’s for a house, a business, or an investment without the parent necessarily using gift tax exemption.
7:14 – It can also be a really useful tool when parents want to treat their children equitably, but recognize that each child may need help at different times or for different reasons. You don’t necessarily have to give every child the same amount every time one child needs assistance. A loan allows you to help that child when they need it, while keeping clear documentation of what each child has received.
7:36 – There’s also a potential wealth transfer benefit if the child invests the money or purchases an asset that appreciates at a rate greater than the interest rate on the loan. That excess appreciation has effectively shifted to the next generation, and the documentation is important. Ten years later, nobody has to remember whether something was intended to be a gift or a loan.
7:57 – The key is that this needs to be treated as a real loan with proper documentation, interest, and payments. We’ve covered some of the simpler, more flexible strategies. Now we’re moving into the more advanced end of the toolbox. There are a number of different strategies available, and each is designed to accomplish something a little different depending on the assets you own and what you’re trying to achieve.
8:19 – I’m going to spend a little more time on a couple of these, particularly GRATs and IDGTs, because they help illustrate how we can shift future appreciation out of an estate and make more effective use of the lifetime exemption. Other strategies may be useful for a family business or real estate, a primary or vacation home, or for families with charitable goals.
8:42 – And you’ll see several of these strategies come together later when we walk through our case study. A GRAT is powerful when you own an asset you think is going to appreciate significantly. You put the asset into the trust for a specified term and receive annuity payments back during the term. Those payments are structured to return the value you contributed, plus the IRS assumed rate of return, or what we refer to as the hurdle rate.
9:09 – Because of that, the GRAT can be structured so that little or no lifetime exemption is used. So with a GRAT, we’re essentially looking for the asset to outperform the IRS hurdle rate. If it does, we’ve shifted that excess growth out of the estate with little or no use of lifetime exemption. And if it doesn’t, the assets essentially come back to you through the annuity payments.
9:32 – So you’ve lost the planning opportunity. But other than the relatively modest cost of establishing and administering the GRAT, you’re essentially back where you started. Your unified estate and gift tax exemption: this is one of the concepts that is most important to understand. You essentially have one lifetime exemption. You can use it to make gifts during your lifetime, or whatever you haven’t used remains available at death.
9:57 – So the question becomes, why would I use some of my exemption today rather than simply wait? The answer is really about appreciation. If I transfer a highly appreciating asset today, I’m not only moving today’s value out of my estate, I’m also moving all of the future appreciation. Using your exemption by transferring assets to an intentionally defective grantor trust, or IDGT, takes that concept a step further.
10:24 – You transfer appreciating assets to the trust and use some of your lifetime exemption. From that point forward, the future appreciation occurs outside of your taxable estate. But there’s another important benefit because this was set up as an intentionally defective grantor trust, the grantor continues to pay the income tax generated by the trust.
10:44 – That may not sound like a benefit initially, but from an estate planning standpoint, it can be very powerful. The trust doesn’t have to use its own assets to pay those taxes. So the trust is essentially growing income tax free. You’re essentially paying the tax bill for an asset you no longer own for estate tax purposes, which allows even more wealth to accumulate outside of your estate.
11:07 – Trusts aren’t the only tools available. Family LLCs and family limited partnerships can be particularly helpful for families that own businesses or real estate. They can centralize ownership and allow families to separate management and control from economic ownership. Charitable planning is another important part of wealth transfer planning.
11:28 – There are a number of different structures that can help families accomplish their philanthropic goals, while potentially creating income or estate tax benefits. So why give during your lifetime? Many people simply include a charitable bequest in their will. And there’s certainly nothing wrong with that. But if you already know that charity is going to be part of your plan, it’s worth asking whether giving during your lifetime can accomplish more.
11:52 – Depending on the strategy, you may be able to receive an income tax benefit today, remove assets and future appreciation from your taxable estate and actually see the impact of your philanthropy during your lifetime. So it isn’t necessarily about giving more. It’s about being thoughtful about when and how you give. These are four of the charitable structures we commonly see, and they each help accomplish different goals.
12:16 – A donor advised fund is relatively simple and flexible. You can receive a deduction when you contribute and then make grants to charities over time. A private foundation provides more control and can be a great way to involve multiple generations of the family, but it also comes with more administration and reporting. A charitable remainder trust generally provides an income stream to you first, with the remainder ultimately going to charity.
12:42 – A charitable lead trust essentially works in the opposite direction. Charity receives the income stream first, and the remaining assets ultimately pass to the family. Similar to the GRAT we discussed earlier, there is an IRS hurdle rate. If the assets in the trust outperform the hurdle rate, that excess growth can ultimately pass to the beneficiaries free of additional gift and estate tax.
13:06 – We’ve used them several times with our clients, and they have been very effective at accomplishing both goals, providing meaningful support to the charities our clients care about, while also transferring significant assets to the next generation. The right structure really depends on your charitable goals, your tax situation, and what you’re ultimately trying to accomplish.
13:29 – We spent a lot of time talking about techniques and taxes, but I don’t want taxes to become the tail that wags the dog. The best estate plan isn’t necessarily the one that produces the lowest possible estate tax, it’s the one that accomplishes what you want for your family. That may mean protecting assets. It may mean preserving a family business or property. It may mean philanthropy.
13:49 – And increasingly, it means thinking about whether the next generation is actually prepared for the wealth they are going to receive. You can create the most sophisticated trust in the world, but if the children aren’t prepared to inherit the assets, if you’ve chosen the wrong person to manage them, or if the plan ultimately creates conflict among family members, we haven’t necessarily been successful.
14:11 – And that is really where trust and family governance become so important. It isn’t just what assets go into a trust, it’s how the trust is structured, who controls it, who serves as trustee, and whether the next generation is prepared for the wealth they are going to receive. And with that, I’m going to turn it over to Stephanie to take us into the next piece.
STEPHANIE STUMPF
14:33 – Andrea’s walked through a number of strategies that can help families transfer wealth more efficiently. But as she mentioned, a successful estate plan is about much more than minimizing taxes. Once you decide to transfer wealth, some of the most important questions become how should those assets be held? Who should control and manage them? How much access should beneficiaries have?
14:54 – And how do you prepare the next generation to receive that wealth responsibly? That’s where trust and family governance become so important. So we’re going to spend some time talking about why trusts matter, how to think about choosing a trustee, and how families can prepare the next generation for the wealth they will ultimately receive. There are really three broad reasons we use trust: protection, management, and preservation.
15:20 – From a protection standpoint, trust can help protect assets from creditors, divorce, and sometimes even a beneficiary’s own inexperience or poor decision making. They also provide management. Rather than simply giving someone an inheritance outright, a trust allows you to establish who will manage the assets and the circumstances under which distributions can be made.
15:41 – And finally, trusts can help preserve wealth across generations. Instead of thinking only about what you’re leaving to your children, you can structure a trust to benefit children, grandchildren, and potentially future generations. So a trust isn’t simply a tax planning vehicle, it’s really a way of putting some structure around how you want your wealth to benefit your family.
16:03 – You’ve already heard Andrea discuss several of these strategies, so I’m not going to go back through all of the mechanics. What I want to emphasize is that we don’t start by deciding that someone needs a GRAT, a SLAT, or a QPRT. We start with what the family is trying to accomplish and then determine which trust, if any, best accomplishes that goal. A GRAT might make sense when we’re trying to move appreciation.
16:25 – A SLAT can allow a married couple to use exemption while maintaining some indirect access through a spouse. A QPRT may make sense when preserving a family residence is important, and a charitable trust can combine philanthropic goals with tax and estate planning. The trust is really the tool. The family objective should drive which tool we choose. Let’s bring all of this together with an example.
16:47 – John and Jane are in their late 60s with five children, five grandchildren, and a net worth of approximately $45 million. John is nearing retirement and has accumulated a significant amount of stock in the public company where he works. Because of his position, he’s currently restricted in his ability to sell or diversify that stock.
17:07 – Jane inherited a beach home on Figure Eight Island that is very important to her, and she would like to keep it in the family. She’s also very active philanthropically and is the beneficiary of the family trust with a corporate trustee. Despite all of that complexity, when they first came to us, they really only had simple wills. So the question wasn’t just how do we reduce estate taxes, it was how do we transfer future growth, preserve assets that are important to the family, incorporate their charitable goals, and create a plan that works for the next generation.
17:40 – Rather than jumping immediately to a particular trust, we started by identifying their planning priorities. First, we needed to modernize the basic estate plan. Then we looked at ways to move future appreciation out of the estate, use their lifetime exemptions strategically, and preserve the beach house for the family. We also wanted to incorporate Jane’s charitable goals in a way that coordinated with her overall tax planning.
18:03 – And that’s really the point of this slide. We aren’t trying to use every strategy available or make the plan as complicated as possible. We’re choosing different tools to accomplish different goals and making sure they all work together. For John and Jane, a significant part of the planning focused on moving future growth out of their estate. We used rolling two-year GRATs for some of John’s concentrated company stock.
18:26 – As Andrea explained earlier, appreciation above the IRS hurdle rate can pass to the next generation without using additional exemption. John also used $10 million of his lifetime exemption to establish a SLAT for Jane and their descendants, moving both those assets and their future appreciation outside of the estate. We also established long term dynasty trusts including separate trusts for the grandchildren.
18:50 – And because these are grantor trusts, John and Jane continue to pay the income taxes associated with the trust. That allows the trust assets to continue growing without being reduced by those taxes, while John and Jane’s payment of the taxes further reduces their own estate. The key theme here is we’re using exemptions strategically for selected transfers, then using other techniques to shift additional growth out of their estate.
19:16 – We then had two very different assets and goals to address. The Figure Eight Island home had both financial and emotional value to the family. Jane wanted to continue using it, but ultimately wanted it to remain in the family. A QPRT gave us a way to begin transferring that home while Jane retained the right to use it for a specified period.
19:37 – We also knew philanthropy was important to Jane, and that John’s retirement could create an opportunity from an income tax standpoint. So charitable planning became part of the overall strategy rather than something separate from it. The important point is that estate planning isn’t only about finding the strategy that saves the most tax. It’s about matching the right strategy with the right asset and the family’s goals for that asset.
20:01 – Originally, John and Jane had substantial wealth and a number of very good planning opportunities, but the pieces were not coordinated. They had simple wills, concentrated stock, a significant taxable estate, a family property without a succession plan, and charitable intentions that were not integrated into the tax planning. After the planning process, those pieces became part of one coordinated strategy: revocable trusts, rolling GRATs, the SLAT and dynasty trusts, the QPRT, and charitable planning.
20:31 – The difference isn’t simply that we now have more trusts, it’s that each part of their wealth has a purpose and a plan. And that brings us to something that’s incredibly important once you create these trusts. Who controls the trusts and who will be responsible for them? Choosing the right trustee can be just as important as choosing the trust itself.
20:51 – The trustee is the person or institution responsible for carrying out the terms of the trust, so this isn’t a role that should be assigned simply because someone is a family member or because a particular bank happens to be named in the document. You may choose an individual trustee, a corporate trustee, co-trustees, or a directed trust structure where different responsibilities are divided among different parties.
21:15 – There is not one right answer. The right trustee depends on the purpose of the trust, the assets involved, the beneficiaries, and how much independence or professional oversight is needed. If we go back to John and Jane, you can see they didn’t use the same trustee for every trust. John and Jane serve in different roles where it makes sense.
21:35 – A corporate trustee or family members are involved with some of the longer term trusts, and the parents serve as trustees for their own children’s trust. Jane’s existing family trust is a good example of why this matters. ABC Bank had served as trustee for years, and Jane was unhappy with both the relationship and the service, but she felt trapped.
21:56 – She assumed that because the bank was named in the trust, she had no ability to make a change. Working with her estate attorney, she discovered there was a mechanism to replace the bank. Ultimately, Jane was able to move to a structure where she was able to serve as co-trustee in a directed trust arrangement. The takeaway is that trustee selection is part of the planning process, and in some cases, a trustee decision made years ago does not have to be permanent.
22:24 – It’s also important to understand what you’re agreeing to when you agree to serve as a trustee. A trustee isn’t simply the person who signs a check when a beneficiary asks for money. There are investment responsibilities, decisions about distributions, tax returns, record keeping, and ongoing communication with beneficiaries.
22:44 – Most importantly, the trustee is a fiduciary and has a legal responsibility to follow the trust document and act in the beneficiary’s best interest. That’s one reason we spend so much time talking with clients about whether an individual family member is really the right person for the job or whether professional support would be helpful. Being trustworthy is important, but being a good trustee also requires time, judgment, and the ability to administer the trust properly.
23:12 – That brings us to family governance, which can sound like something that’s only relevant for billionaires or families with a family office. It really isn’t. In its simplest form, family governance is about communication, education, and creating some structure around family decision making. That might mean regular family meetings, talking openly about the family’s values and goals, educating children about investments and financial responsibility, or gradually involving the next generation in decisions.
23:40 – The goal isn’t necessarily to tell your children exactly what they’re going to inherit. It’s to make sure they aren’t completely unprepared when that responsibility eventually comes to them. This is where we start moving beyond simply transferring wealth to thinking about what you actually want that wealth to accomplish. What values helped your family create the wealth in the first place?
24:01 – What do you want your children and grandchildren to understand about it? And what responsibilities come with receiving it? Some families develop a formal mission statement. For others, it’s simply a series of conversations over time. The formality isn’t what’s important. What’s important is creating a shared understanding of what the wealth represents and preparing the next generation to become good stewards of it.
24:26 – Ultimately, a successful legacy isn’t just about how much money reaches the next generation, it’s also about whether they are prepared to manage it. Philanthropy can actually be one of the best ways to begin these conversations with children and grandchildren. A donor-advised fund or family foundation gives the family something very tangible to work on together.
24:47 – You can involve children in researching charities, deciding where grants should go, and talking about why certain causes are more important to the family. You can start by doing this long before they’re ready to participate in decisions about the family’s larger wealth. We’ve seen annual family meetings around charitable giving become a great way to teach children and grandchildren about money, responsibility, and stewardship.
25:10 – You’re not just giving money away, you’re using philanthropy as a way to teach the next generation about family values and how to make thoughtful financial decisions. When we put all of this together, you can see that successful wealth transfer has several layers. The foundation is a good estate plan, wills, trusts, powers of attorney, and the basic documents everyone needs.
25:33 – Then we add the appropriate trust structures based on the family’s goals. We coordinate those strategies with investment and tax planning. But we can’t stop there. We also need communication, education, and preparation of the people who will ultimately receive and manage the wealth. When all of those pieces work together, we’re not simply transferring assets, we’re transferring wealth, responsibility, and values to the next generation.
25:58 – Before we wrap up, there are a few mistakes we see repeatedly. One of the biggest mistakes is simply waiting too long. People know they need to update their estate plan, but it’s very easy to keep putting it off. Another is creating the documents and then never looking at them again. Families change, tax laws change, assets change, and the people you chose as trustees or executors 15 years ago may no longer be the right people.
26:24 – We also see families put tremendous thought into the legal documents but very little thought into communicating with the people who will ultimately be affected by them. And finally, estate planning, tax planning, investment planning should not happen independently. Some of the best opportunities come from having your advisors working together rather than making decisions in separate silos.
26:47 – So there are three things we’d encourage you to do after today that are fairly simple. First, pull out your estate planning documents and look at when they were last updated. As a general rule, we recommend reviewing the plan every three to five years and sooner if you’ve had a significant change in your family or financial situation. Second, understand your potential estate tax exposure and whether there are gifting or other planning opportunities that make sense today rather than waiting.
27:13 – And third, start communicating. That may mean talking with your spouse, your children, or your advisors. You don’t necessarily need to share every number with children, but starting the conversation is important. The best estate planning is proactive. It’s much easier to create flexibility and take advantage of planning opportunities before there’s a crisis or a deadline.
27:36 – That brings us to the end of our presentation. We hope we’ve given you a better understanding not only of some of the strategies available, but also of how all these pieces fit together. Estate planning is very personal, and the right strategy is going to look different for every family, depending on your assets, your goals, and the people for whom you are planning. Thank you for your time today.
27:57 – If you have any questions, please contact me or Andrea or your WealthCrossing advisor.
