Knowing What Counts Podcast

Estate Tax Mastery: Gifting Strategies for Wealth Protection

• Tim Provost, CPA • Episode 14

Share episode

Send us a text

Gifting Your Estate: Estate and Gift Tax Strategies - Featuring: Anthony Trinchini, Senior Tax Associate 

Financial security isn't just about what you build—it's about how effectively you pass it on. When senior tax advisor Anthony Trinchini joins the Knowing What Counts podcast, he cuts through the complexity of estate planning to reveal strategies that protect wealth while minimizing tax exposure.

The conversation begins with the essential mechanics of gift and estate taxes. Anthony explains how the annual exclusion ($19,000 per recipient in 2025) works alongside the lifetime exemption (nearly $14 million per person). The key insight? Gifting appreciating assets early freezes their value for tax purposes while shifting all future growth outside your estate—a powerful wealth preservation technique too many people discover too late.

Trusts emerge as versatile tools with distinct advantages. Revocable trusts don't reduce estate taxes but help avoid probate. Irrevocable trusts remove assets from your estate entirely. Grantor trusts allow you to cover the income taxes, essentially making additional tax-free gifts. The discussion explores specialized options like QPRTs (Qualified Personal Residence Trusts) for transferring homes at discounted values, GRATs (Grantor Retained Annuity Trusts) for capturing excess growth of appreciating assets, and SLATs (Spousal Lifetime Access Trusts) that allow married couples to reduce estate taxes without surrendering complete access to assets.

Beyond trusts, Anthony highlights two additional powerful strategies: 529 education plans with their front-loading capability ($95,000 individual/$190,000 couple tax-free gifting in a single year) and family LLCs that enable valuation discounts of 20-40% when gifting business interests. His most emphatic advice? Start early with coordinated planning between your CPA and estate attorney. Estate planning isn't one-size-fits-all—it should align with your family's unique goals and values.

Ready to protect your legacy and minimize tax burdens? Connect with the expert team at MPCPAs today by visiting mpgroupcpa.com or calling 413-739-1800. Remember, success begins with knowing what counts.

To learn more about MP CPAs visit:
https://thempgroupcpa.com/
MP CPAs
413-739-1800

Speaker 1:

Welcome to the Knowing what Counts podcast, the place where expert guidance meets smart financial decisions. Whether you're a high net worth individual or a thriving business, the experts at MPCPAs are here to help you protect and optimize your wealth. Let's get started, because success begins with Knowing what Counts. Because success begins with knowing what counts.

Speaker 2:

Estate planning isn't just about preserving wealth. It's about gifting it strategically, and this episode will unpack estate and gift tax strategies to maximize impact while minimizing tax burdens. Welcome back everyone. I'm Sophia Yvette, co-host slash producer, back in the studio with Anthony Trinchini, senior tax advisor at MPCPAs. Anthony, how's your day been going so far?

Speaker 3:

Everything's well, Sophia. I'm glad to be here.

Speaker 2:

Awesome, well, glad to have you on, tony. Can you introduce yourself?

Speaker 3:

Yes, my name's Tony Trinchini. I'm a senior staff accountant at MPCPAs, and I began working at MPCPAs after graduating from UMass Eisenberg in 2020.

Speaker 2:

Now, what's the first thing people should consider when thinking of gifting or planning their estate?

Speaker 3:

The first thing to consider is how the gift and estate tax system works. For example, in 2025, you can give up to $19,000 per person per year without using any of your lifetime exemption. That's called the annual exclusion. For larger gifts that exceed that $19,000 threshold, you can use part of your lifetime exemption, which is just under $14 million per person in 2025. And you're probably asking yourself why does this matter? Right, it's because gifting early lets you shift your future growth out of your estate. If you hold onto those appreciating assets, whether it's stock, real estate or a business, they'll continue growing inside of your taxable estate, and that just leads to a big tax hit later. So gifting those assets now not only uses your exemption more efficiently, but it also freezes your estate value for tax purposes.

Speaker 2:

Wow, now I heard a lot about utilizing trusts. How do trusts help plan for gifting and estate tax?

Speaker 3:

Well, trusts are really flexible tools. You have several different types of trusts. Revocable trust doesn't reduce estate taxes, but it's great for avoiding probate and organizing your assets, particularly your home or your personal residence. So that's why it's important to distinguish that legal advice and tax advice are not always in perfect alignment, because a revocable trust for tax purposes isn't ideal, but when it comes to putting your property into a revocable trust, legally, that's a smart thing to do. An irrevocable trust, on the other hand, removes the assets from your estate and that helps lower your estate taxes. Then you have grantor trusts. A grantor trust is a type of irrevocable trust where you whether you're the grantor or the estate you still pay the income taxes for the trust earnings. So that lets the trust go faster for your beneficiaries and because you're covering the tax, it's like making additional tax-free gifts.

Speaker 3:

And another good example that we're starting to see a lot of is Cuperts, and a Cupert is a qualified personal residence trust. Essentially, a Cupert is the process of transferring your home into a trust is the process of transferring your home into a trust. You retain the right to live in it for a set number of years it could be four, five, 10 years Because your heirs don't get that house right away. The gift is valued at a discount, so that's going to be less than the home's market value. If you, the grantor of this trust, if you outlive this term, the home and all future appreciation are out of your state. The only downside to this is that the heirs won't get a step up in basis, so if they do sell that property, they'll be exposed to additional capital gains taxes. And then there are always grantor retained annuity trusts and we call these GRATs and they open a whole other can of worms.

Speaker 2:

Now let's get into that can of worms. What is grantor retained annuity trust and how do those work?

Speaker 3:

Well, a GRAT is another type of irrevocable trust. Well, a grant is another type of irrevocable trust, and it's a trust in which you, the grantor, you put assets in and you receive annual payments back for a set number of years, hence the name annuity trust. It's like an annuity. At the end, anything left over goes to your beneficiaries of that trust with no gift tax. So this works well with assets that are likely to appreciate, because if they grow faster than the IRS has assumed rate, that excess growth passes to your heirs outside of your estate. But, like a cuper, you'll need to outlive the term for it to work, and there's really no downside to this, though. Unless the assets don't grow, then there's nothing left to be gifted to the beneficiaries afterwards.

Speaker 2:

Now, what is a SLAT, and is it different than a GRAT?

Speaker 3:

Yeah, it is A SLAT, or it's called a Spousal Lifetime Access Trust. It's also an irrevocable trust, but it works differently than a grad. With a SLAT, one spouse makes a gift into a trust for the benefit of the other spouse and this removes the assets from the taxable estate while still keeping indirect access through the beneficiary spouse. So the spouse can use the assets within this SLAT, but now those assets are outside of the estate. So if it's structured properly, the gift is tax-free because you can utilize the lifetime exemption, as I alluded to earlier, and all the future growth for those assets stays outside the estate. So it's a good strategy for married couples who want to lower the estate tax and not give up full access to those assets. And I guess the only downside to this is if the spouse passes away or if the couple divorces for whatever reason, the access to those assets is lost. So they offer flexibility, but they do bring a different element of risk.

Speaker 2:

Now, Anthony, let's get into the 529 plans. They're well known amongst many people. How can you use 529 plans as part of gifting strategy too?

Speaker 3:

Yeah, 529 plans are great. I recommend them to a lot of clients. It's a tax advantage savings account designed to help families save for education expenses, so college, private school, even, I think, some vocational programs. The money grows tax-free and it can be withdrawn tax-free if it's used for what they determine is qualified education costs. So from a gifting perspective, determine is qualified education costs. So from a gifting perspective, 529s are pretty essential because you can contribute up to the $19,000 per year per beneficiary without triggering gift tax under the annual exclusion. It's great. And another additional benefit is that you can front load it. So that means you can front load for five years. That means you can gift $95,000. Front load for five years? That means you can. You can gift 95 000 or if you're a married couple, you can gift 190 000 in a single year. Gift tax free does not eat into the lifetime exemption and it gets prorated over those five years. So it lets you remove a large amount from your estate quickly, efficiently, and then the growth happens outside of your taxable estate.

Speaker 2:

Now what methods other than trusts can be used as gift assets?

Speaker 3:

Well, a popular and effective strategy is using a family LLC, especially when gifting investments or real estate. You transfer assets into the LLC and then gift the membership interest to the family. So because those interests are not really marketable, the IRS says you can discount them. So it's called valuation discount. So sometimes 20 to 40% of the full asset value is discounted for gift tax purposes. So that helps save your lifetime exemption. So you transfer more economic value while using less of your lifetime exemption, and then you also retain control over the investments inside of that family LLC.

Speaker 2:

Wow. Now one final question for you today what's your biggest tip for people just getting started with gifting or planning for estate?

Speaker 3:

Yeah, I'd say start early. Reach out to your CPA and an estate planning attorney, get them both on a call and start talking to them about what your options are. The sooner you begin, the more time you have to get those gifts out of your estate and to grow tax-free outside of your estate. And one thing to consider is just it's not a one size fits all for everybody. Everybody's different. You have different goals, so you have to work with an advisor to build that plan and make sure that it fits your family's goals and your needs and your family's values. And it doesn't necessarily always have to be for tax purposes.

Speaker 2:

Wow. Thank you so much for today, Anthony, and all those helpful insights for our listeners. We'll catch you in the next episode, maybe. Have a fantastic rest of your day thank you, sophia, it's been a pleasure thanks for listening to the knowing what counts podcast.

Speaker 1:

ready to optimize your wealth and protect your future, visit the mpgroupcpacom or call 413-739-1800 to connect with our team of experts. Remember, success is about knowing what counts.