Can you believe that it’s that time of year… again… 

And every year things change.  Not just in our lives but tax, estate, trust and other laws change too. Sometimes they matter to you.  So, we’ve put together an updated article to help you to think about the end of the year and a bit about the future of your legacy, protecting your heirs, your estate planning, and even “elder law” issues related to you or a loved one.  

Once again in 2022, actual and proposed changes in state law and in the federal law have made end of year issues and decisions important, difficult, and unpredictable.  While there is not much time left in 2022 to complete vital end‑of‑year tasks (including estate planning like will or trust updates, gifts to children, grandchildren, or others), and that 2022/23 may offer clients an opportunity to do real planning before the next round of changes currently slated for December 31, 2025.  However, we’ll watch the midterm and presidential elections in 2023 and 2024 closely for how they will effect you. 

In short, there are possible reductions in the amount you can give during your lifetime and at death (without paying estate or gift taxes).  Given these constant changes to the Internal Revenue Code by Congress and the President, careful estate planning, document updates, and lifetime gifting may be even more important now than ever.  And, if you’re over 65 with a net worth of less than $5 million, you might want to start thinking about “elder law” issues to protect you and your spouse, as well as your loved ones for exceptionally high cost of long term care.

But gifting at the end of the year (or at any time) isn’t the only issue. There are many strategies to protect a surviving spouse or heirs from litigation and creditors, and in the case of our children – even from divorce.  We can also create planning now in order to simplify the process, and to minimize fees and taxes at death.

So let’s help to prioritize your options and make a few suggestions. Not all of these techniques will be right for you, but it is better to know more about them so that you can make an informed decisions now and in the future.

1. Annual Gifts to Children, Grandchildren, and Others.  First, if you wish to make gifts to children, grandchildren or other members of the family (even unrelated friends can be included) the Internal Revenue Code currently allows you to gift up to $16,000.00 per person in 2022 ($17,000 per person in 2023). In addition, if you're married, each spouse can also gift to as many individuals as he or she wishes. That makes this a very powerful technique for moving significant assets to the next generation and free from estate and gift taxation. See the examples below. 

NOTE:  This number can (and does often) change so check back here periodically to see what Congress and the IRS has done to help or hurt taxpayers.

Example: A married couple could, therefore, give up to $32,000.00 in 2022 to a child and/or grandchild AND, if you wanted to, you could do the same to your grandchild's spouse & their children.  These gifts can also be outright or gifted to a custom trust that you create, a 529 plan, or to UTMA account. 

NOTE: That's quite a bit of money that can be moved out of your estate each year and there are specific rules regarding "prefunding" 529 plans with gifts.

EXCLUSIVE TIP: Make sure that the gift "checks" are cashed before the end of the year or the IRS can argue that it was not a completed gift in that tax year

PRO TAX TIP: If you’re making a gift of appreciated stock (in your own company or a publicly traded company) or other appreciated assets be sure to consult us and/or your income tax advisor as your children will get your tax basis in the property.  (That means that they may incur capital gains taxes when the stock is sold.) Once again, these gifts need to be completed before the end of any tax year.

And, if you're gifting a "hard to value" asset like stock in a closely held business or real estate, you'll need an appraisal to establish the value for the gift (as you'll need to file a Form 709 gift tax return). However, the IRS has only 3 years to contest that value by auditing the Form 709 gift tax return.

BONUS SECRET TIP: ​You can actually gift more than the annual gift tax exclusion in any year but it will use up some of your lifetime/ death tax exemption. If you want to gift amounts in addition to the $16k be sure to consult your estate planning attorney and/or accountant as many gifts require the filing of a Form 709 gift tax return on or before April 15 (or October 15th if you apply for an extension of time to file). For more details see “2. Want To Make A Larger Gift?” below.

For those with larger estates, 2022, 2023 and 2024 might be the years to make larger gifts, but check with your advisers as your particular facts matter very much.

EXTRA BONUS TIP:  You can also make additional gifts for education over and above the $16,000 dollars ($17,000 in 2023), make sure that tuition checks are made out directly to the school. Call your attorney or tax advisor for more specifics.

WARNING:  While these gifts are permitted by federal law, they might have unexpected effects on your ability to qualify for Medicaid (if you're facing long-term nursing care) or long term government health care benefits and on the ability of the child or recipient to get federal aid.  Be sure to consult an elder law attorney before making gifts if you do not have long term care coverage and/or if the value of your assets are below ($1,000,000) one million dollars per spouse.

MORE INFO?  If you need to know more about how to gift to children and grandchildren for college, get our free report here.

2. Want to Make a Larger Gift?

If you’re planning on making a large gift before the end of 2022, or at any time during 2023 (to prepare for the reduction of the lifetime exemption scheduled for December 31, 2025), remember that, in addition to the annual gift tax exclusion (the renewable amount you get to give every year), the IRS confirmed that in 2022 you could also give up to a total of $12,060,000 during your lifetime or at death without you or your estate having to pay tax.  In 2023, the estate and gift tax exemption will rise to $12,920,000 per individual.  This also means that a married couple could shelter $25,840,000 in gifts or at death.

NOTE: However, any such larger gifts require that a gift tax return (709) be filed, and that will also reduce the amount available to you to shelter in your estate at the time of your death. 

The good news is that gifting out assets that grow in value (especially important during times of inflation) may save your heirs significant estate tax and/or inheritance tax on that growth in value.

It is also possible for spouses to join together to make larger gifts but that might also require a special form of 709 gift tax filing called a "split gift". See WARNING above.

EXCLUSIVE TIP 1:  Sometimes, gifts can be combined with family loans to achieve good estate planning objectives.

EXCLUSIVE TIP 2:  Gifts to children or grandchildren can also be made outright OR can be made to special trusts that can protect your heirs from divorce, lawsuits and other creditors.

So if you’re considering a larger gift, give us a call and we can give you advice about the best way to structure it. It's not hard but it needs to be done right.  

3. Do a Memorandum to your Executors/Transferees and Heirs

Memos that supplement your wills or trusts and that provide vital information to your heirs can reduce stress, help your family to carry out your wishes, and speed up the process. 

To get more information about how to do a helpful memo and what should be included click here to download our report, Memo on Memos.

4. Is 2022/2023 The Time to Graduate From a Will to a Trust? 

While this doesn't technically need to be done by the end of the year it’s a good idea to put this on your list of New Year’s resolutions. 

Should you change your estate planning from simply a will to "pour over will" and a revocable living trust? 

This decision is an important and complicated one but we can help you to simplify it. 



Basically, you should give strong consideration to a trust if you fit one or more of the following: 

      1) you have real estate in multiple states (so that you avoid multiple probates);

      2) you are single or widowed and have assets in excess of $5 million dollars (as probate fees can start to add up);

      3) you have a family member or other person who is expecting an inheritance and whom you’re disinheriting, or you have a possible challenge to your will (since trusts are harder to challenge);

      4) if you’re quite elderly and want someone to manage your assets and to pay the bills starting now; or

      5) you wish to organize your affairs now to simplify and save your heirs money including minimizing probate fees and other expenses, 

If one or more of these indications are true for you, get personalized information on the benefits of a trust, and to help you to decide if it's worth the extra cost.  Just call 610-933-8069 to get a consultation on a trust update to your planning.

5. Protecting Your Heirs From Divorce & Lawsuits

Want to know more about how trusts created in your estate plan, through a trust or will, can protect your children and grandchildren from divorce and lawsuits?  

Get our Enhanced Estate Planning Guide here. or if you know  you want this upgrade to your estate plan, please call us for an appointment at 610-933-8069.

6. Elder Law Protection, ​Aging In Place With A Long Term Care Contract, Or Moving To An Assisted Living or Retirement Community.

Want to know more about Elder Law Trusts and how they can protect your assets from the high cost of long term and/or nursing home care?  Click Here.

Also, if you’re considering a significant move or change of lifestyle in 2023, we have great news.

So many clients have been calling and asking about moving to a retirement, assisted living or other community OR about aging in place and having a long term care contract, that we have developed a special bundle of services for you.

This change of life review includes a review of all your estate planning documents (such as wills, trusts, powers-of-attorney, living wills and other health care documents) as well as review of any housing or related contracts (that can contain many surprises).

So if you or a loved one are facing these issues in 2022, please call us at 610-933-8069 to reserve a complete review.  

7. Need to Know More About Revocable Trusts and Trustees?

We have published a Trustee Manual of over 170 pages of advice, checklists, and step by step actions for trustees.  Get one for your heirs.  

VIP discounts are available if you're a client, and if you call 610-933-8069.  We will not charge you until the manual ships to you or the person you're giving it to.  The regular price of $297 is discounted to $197 for existing clients, extra copies are only $137 each.

If you need help deciding, call 610-933-8069.  Existing clients can have a complimentary consultation on this issue.

8. Do You Need a Nursing Home or "Elder Law" Trust?

We call our special versions of these trusts Asset Guardian Trusts (TM).  To hear more, click here to see a video on Elder Law Trust & House Calls from our Mobile Elder Law program.

You should also consider using an irrevocable trust to protect your assets from nursing home or in home long term care costs. 

If you have assets that exceed what you need to live and you may be facing nursing home care in the future, you may want to preserve and protect some of those assets for your spouse and/or heirs. 

While it’s possible to do emergency nursing home planning, much more can be done by planning in advance. 

Please call for a complimentary phone consultation, 610-933-8069.

9. The Supreme Court Took Away IRA Asset Protection for Your Heirs.  Here's how to get it back - an IRA Protection Trust. 

If you have left your IRAs to one or more children or grandchildren and those heirs are currently the direct and outright beneficiaries, it’s definitely time to consider using IRA trusts under your will and trust when your IRA assets exceed $200,000.00 or $300,000.00 per child/beneficiary. 

These trusts can help to give back the protection that the Supreme Court took away AND can protect your hard earned IRA assets for your children or grandchildren to grow for their own retirements. If you need one of these trusts to protect your heirs from losing an inherited IRA to a lawsuit or divorce, please call to schedule a consultation.

EXAMPLE: Have 1 child who's receiving $500k or more of IRA assets?  Then an IRA trust might make sense.  Have a $300k IRA split between 2 heirs?  Then the trust might not matter.

10. Do an Insurance Check Up.

Remember to check your car and homeowner’s insurance policies to make sure that your underinsured and uninsured motorist coverage is sufficient.  This coverage affects you if you’re hit by a driver who does not have adequate insurance. We find many of our clients have very minimal coverage, and this very inexpensive insurance can be easily increased. 

Make sure that you have a personal umbrella liability policy to protect you in the event of a car accident or other lawsuit. 

These policies can provide $1, $2, $3, $4, or $5 million dollars and even more on top of your homeowners or car insurance. 

They could be vital in protecting your assets in the event of a serious accident or other liability.  Be sure to check with your insurance advisor.  

Our insurance book is available by clicking here.

11. BONUS END OF YEAR POINTER - Do a beneficiary review of all of your life insurance, IRA's, 401(k)s and other accounts.

If it's been a while, consider doing a full review to make sure that your life insurance, annuity, and other account beneficiary designations are correct.  

Failure to do this properly might override your wills and/or trusts and create very serious tax problems for your heirs.

It's a good idea to review both your primary and contingent beneficiary designations and to note that they may be different for life insurance as opposed to retirement and deferred tax accounts such as IRAs, 401(k)s and 403(b)s.

If you're an existing client, watch your email for final 2023 tax law changes. 

David M. Frees, III
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Attorney, Speaker and Author
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