As we reflect on 2024 and move into 2025, ultra high net worth (UHNW) individuals face unique opportunities and challenges in managing their wealth. Strategic planning has never been more critical with the expiration of key tax provisions looming and market conditions evolving. This whitepaper outlines key considerations in wealth management, including investment strategies, income tax planning, estate planning, charitable giving, and retirement planning, tailored for UHNW clients.

Key Highlights from 2024

The 2024 U.S. presidential election, held on November 5, marked a pivotal year in politics. Former President Donald Trump secured a second non-consecutive term by defeating Vice President Kamala Harris. Republicans also retained control of the House of Representatives and regained the Senate, achieving a GOP majority across the federal government. This shift enables Republicans to pass certain legislation with a simple majority of 51 votes in the Senate, though it is subject to certain constraints, such as the Byrd Rule.

With the Tax Cuts and Jobs Act (TCJA) set to expire on December 31, 2025, tax policy has taken center stage in political and public discussions. Notably, the federal lifetime gift and estate tax exemption increased by $690,000 in 2024, reaching $13,610,000 per individual ($27,220,000 per married couple). This adjustment offers new opportunities for individuals who have already maximized their lifetime gift tax exemption by transferring additional assets from their taxable estate. However, this exemption is scheduled to “sunset” at the end of 2025, reverting to an inflation-adjusted amount of approximately $7 million per person.

Taxpayers should reassess strategies for charitable giving, especially in light of the TCJA’s enhanced standard deduction. Techniques such as “bunching” contributions into a single year, paired with Donor Advised Funds (DAFs), private foundations, or other charitable vehicles, can optimize tax benefits.

Meanwhile, the economic climate also influenced planning decisions. By late November 2024, the 30-year fixed mortgage rates were at 6.81%. Continued elevated borrowing costs have increased the appeal of intrafamily loans, which can provide families with cost-efficient financing options when structured at the Applicable Federal Rate (AFR).

As the year-end approaches, planning strategies must be finalized by December 31, 2024. Due to the holiday rush and anticipated high demand for client requests, we strongly encourage you to act quickly. If you need any year-end planning, please reach out to a member of your NewEdge team today to discuss your personal situation as soon as possible.

Investment and Income Tax Considerations

Portfolio Management and Asset Location

• Rebalance Your Portfolio: Regularly review and rebalance your portfolio to align investments with evolving wealth strategy goals.
• Determine Asset Location: Not all account types are taxed the same way, and not all kinds of investment income are taxed the same way. Pre-tax retirement plans are tax-deferred until you withdraw assets, which are then taxed as ordinary income. Roth IRAs, on the other hand, are tax-free, with growth not being taxed (as long as you meet the necessary conditions). Earnings in taxable accounts—whether from interest, dividends, or capital gains—are taxed as they are realized rather than at the time of withdrawal.
• Review Long-Term Capital Gains Timing: Evaluate capital gains tax thresholds for 2024:

2024 Long-Term Capital Gains Tax Rate Thresholds

2025 Long-Term Capital Gains Tax Rate Thresholds

• Determine your capital gains tax rate and whether adjusting the timing of recognizing long-term capital gains makes sense. For example, if you have a highly concentrated position and are currently in a lower tax bracket, making additional sales in 2024 may make sense. While tax brackets are not set to change in 2025, they are adjusted for inflation annually.

Tax-Loss Harvesting

• Offset Gains: Sell positions with unrealized capital losses to offset taxable capital gains. Net capital losses can reduce ordinary income by up to $3,000 and carry forward indefinitely.
• Avoid Wash Sales: Be mindful of IRS rules prohibiting repurchasing substantially similar assets within 30 days of a sale.

Income Tax and Trust Planning

• Manage Income Brackets: Accelerate income into 2024 if you expect lower tax rates or defer income into future years based on your circumstances. Review plans to sell assets other than publicly traded securities on an installment basis. Installment sales could result in deferring gains into higher income tax brackets under proposed tax legislation.
• Trust Distributions: For irrevocable non-grantor trusts, carefully evaluate beneficiaries’ circumstances and individual income tax rates when making income tax distributions. Trust beneficiaries may be taxed at a lower rate, especially due to the compressed income tax brackets applicable to non-grantor trusts. If permitted in the trust agreement, Trustees may consider distributing income to beneficiaries in lower tax brackets to mitigate compressed trust tax brackets.
  • Additionally, an irrevocable non-grantor trust with an undistributed annual income of more than $15,200 in 2024 will be subject to the 3.8 percent Medicare surtax. However, some or all of the Medicare surtax may be avoided by distributing such income directly to beneficiaries who are below the individual net investment income threshold amount for the Medicare surtax ($200,000 for single taxpayers, $250,000 for married couples filing jointly, and $125,000 for married individuals filing separately).
• SALT Deduction Workaround: The Tax Cuts and Jobs Act (TCJA) limited the state and local tax (SALT) deduction to $10,000 for joint filers, single taxpayers, and trusts. In response, many states introduced the option for pass-through entities to elect a Pass-Through Entity Tax (PTET). PTET is a voluntary tax paid at the entity level, bypassing the income tax liability for individual or trust owners. This tax is fully deductible on the entity’s federal tax return. effectively circumventing the SALT deduction cap for individuals. Typically, the individual and trust owners receive a state tax credit based on the taxes paid at the entity level. The deadlines for electing PTET vary by state.

Charitable Contributions

• Charitable Giving: Maximize tax benefits by “bunching” contributions into a single year and leveraging Donor Advised Funds (DAFs), private foundations, or other charitable vehicles. A further discussion of charitable giving strategies can be found in a later section of this paper.

529 Plan Contributions

• 529 Plan Contributions: Many states offer tax deductions for contributions, but these count toward the $18,000 annual exclusion gift ($36,000 for married couples). Direct tuition payments may also be a strategic option. Depending on your situation, it may make sense to gift assets to the recipient or a trust for their benefit and pay tuition to the institution directly.

Business Deductions: Bonus Depreciation

• In 2024, businesses can deduct 60% of the cost basis for qualified property placed in service in 2024, down from 80% in 2023. Assess whether to accelerate acquisitions into 2024 or defer them to 2025 based on tax considerations. Any portion of the cost basis not eligible for bonus depreciation will be subject to normal depreciation using normal lives and methods. Regardless of bonus depreciation considerations, consulting with your tax professional about any assets acquired in the current year is prudent.

2024 Strategies for Charitable Giving

Charitable giving is a way to support causes you care about and an opportunity to maximize tax efficiency. While cash donations are common, there are more advanced approaches that can enhance your giving power and create a lasting impact. For 2024, consider the following strategies tailored to the current tax and economic environment.

Leverage Tax-Efficient Giving Options

• The deductibility of charitable contributions depends on the type of gift and recipient organization, with limits ranging from 20% to 60% of your Adjusted Gross Income (AGI). Proper planning can help you maximize these deductions.

Donate Long-Term Appreciated Assets

• Instead of cash, donate long-term appreciated assets such as stocks, bonds, or real estate. This strategy allows you to:
  • Avoid paying capital gains taxes on the appreciation.
  • Claim an income tax deduction for the full fair market value of the asset, subject to AGI limitations.
  • Ensure the recipient charity receives the full value of the gift without any tax liability upon sale.
• This method is particularly advantageous in a year with high market gains or significant asset appreciation.

Utilize a Donor-Advised Fund (DAF)

• Consider contributing to a Donor-Advised Fund (DAF) and “bunching” multiple years of charitable contributions into 2024. This approach allows you to:
  • Surpass the standard deduction threshold ($14,600 for single filers and $29,200 for married couples filing jointly in 2024).
  • Claim a charitable deduction in the year of contribution while deferring distributions to charities in future years.
  • Gain flexibility to support various causes at your discretion over time.

Make Qualified Charitable Distributions (QCDs)

• If you are age 70½ or older, evaluate the benefits of a Qualified Charitable Distribution (QCD) to satisfy up to $105,000 of your required minimum distribution (RMD). A QCD can be made after age 70½ even if you’re not subject to RMDs yet (because you’re under age 73 in 2024). In 2024:
  • QCDs allow you to transfer funds directly from a traditional IRA to a qualified charity without including the distribution in taxable income.
  • This strategy reduces AGI and may help avoid higher Medicare premiums or other tax-related thresholds.
  • Key limitation: QCDs cannot be made to donor-advised funds, private foundations, or grant-making organizations.

Give Away the Gain

• If you anticipate significant capital gains from the sale of investments, a business, or real estate in 2024, implement a charitable strategy to offset taxable gains.
  • Donate a portion of the asset or proceeds to a charity, donor-advised fund, or charitable trust before the sale. This reduces your taxable gain and provides a charitable deduction.

Charitable Remainder Trusts (CRTs)

• A Charitable Remainder Trust (CRT) is an irrevocable trust that provides income to the donor or designated beneficiaries for a specified period, with the remaining assets (the “remainder”) going to a qualified charity after the trust’s term ends. CRTs offer income and estate tax advantages while enabling donors to support charitable causes. Consider using a CRT if you wish to make a substantial charitable donation while still retaining income from your assets. This strategy is particularly beneficial for individuals with highly appreciated assets or concentrated positions, as it allows you to defer taxes on the gain realized until the income is distributed to the beneficiary.
  • When the trust is created, the donor can receive a charitable income tax deduction. This deduction is based on the present value of the charitable remainder (the portion that will eventually go to the charity).
  • If the assets donated to the trust are highly appreciated, the CRT itself does not pay capital gains tax when it sells those assets. This means more money goes into the trust, and the income beneficiaries can receive more. Capital gains taxes are deferred until the time at which income is distributed to the beneficiary.
  • Since the charity is the ultimate beneficiary, the assets placed in the CRT are generally excluded from the donor’s estate for estate tax purposes.

Retirement Planning Strategies for Success

Maximize Contributions to Employer Retirement Accounts and Health Savings Accounts (HSAs)

• Take full advantage of pre-tax contributions to employer-sponsored retirement accounts by December 31, 2024. For individuals contributing to an IRA or Health Savings Account (HSA), ensure that your contributions are made by the April 15, 2025, deadline.

Required Minimum Distributions (RMDs) for IRA Owners and Plan Participants

Who must take an RMD in 2024?

Beginning in 2023, the SECURE 2.0 Act raised the age that you must begin taking RMDs to age 73.

• If the individual turned 72 in 2023: Their first RMD will be due in 2024 (the year they turn 73) and can be taken as late as April 1, 2025. The second RMD will be due by December 31, 2025.
• If the individual turned 73 in 2024: Their first RMD will be due in 2024 and can be taken as late as April 1, 2025. The second RMD will be due by December 31, 2025.
• Employees still working: If you are still employed and participating in your employer’s retirement plan, you may be eligible to delay your RMDs for the employer-sponsored retirement plan until you retire, provided the plan permits this (most plans do).

Required Minimum Distributions (RMDs) for IRA Designated Beneficiaries

RMDs for those subject to the 10-year rule are waived for years 2019-2024.*

*Eligible designated beneficiaries (EDBs) are the spouse or the minor child of the original IRA owner/depositor, a disabled or chronically ill person, or an individual who is not more than 10 years younger than the original depositor.

Review Beneficiary Designations for Retirement Accounts

• It is crucial to periodically review and update beneficiary designations for retirement accounts to ensure they reflect your current intentions. This can help avoid any potential issues with inheritance and ensure that your assets are passed on according to your wishes.

Roth Conversions or Backdoor Roth IRA Contributions

• Consider Roth conversions or backdoor Roth IRA contributions. See our article on this subject.

Align Your Estate Plan with Your Goals for 2024 and Beyond

Year-end provides an excellent opportunity to review and align your estate plan with your evolving goals and aspirations. Below are key areas to focus on as you prepare for 2024:

Review Foundational Estate Planning Documents

• Ensure your will, revocable trust, powers of attorney, and healthcare directives are executed and up to date.
• Verify asset titling and beneficiary designations to reflect changes in your life and priorities, such as marriage, divorce, children, or new business ventures.
• Update documents regularly to align with your personal, family, and business goals.

Once Foundational Documents are in Place, Assess Opportunities for Wealth Transfer Strategies

• Work with the NewEdge Wealth team to review your cash flow and the projected growth of your taxable estate.
• Confirm or implement a wealth transfer strategy for both personal and business assets to minimize taxes and maximize legacy opportunities.

Evaluate Insurance Coverage

• Life Insurance: Ensure your policies align with your family’s survivorship and estate tax planning needs. NewEdge can assist with a life insurance analysis and coordinate a review of ownership and coverage levels.
• Property and Casualty Insurance: Regularly revisit these policies as personal or business circumstances evolve, such as marriage, children, property acquisitions, or business growth. A risk assessment can help optimize coverage adequacy, cost management, and policy terms.

Family Education and Legacy Planning

• Discuss developing a family education plan to prepare heirs for future wealth and promote stewardship.
• Use family gatherings like the holiday season to initiate conversations with the next generation about your estate plan and implemented strategies.

Maximize Your “Freebies!”

• The annual exclusion gift tax increased to $18,000 per donor in 2024 ($36,000 for married couples). Leverage this increase to reduce your taxable estate. Gifts exceeding the annual exclusion will utilize a portion of your $13.61 million (or $27.22 million per married couple) federal lifetime gift and estate tax exemption.
• Consider front-loading 529 College Savings Plans with up to five years of annual exclusion gifts, allowing contributions of up to $90,000 in 2024 ($180,000 for married couples).
• Your NewEdge Wealth team can help you determine whether it makes sense to fund a 529 Plan, pay tuition directly, or a combination thereof. Many factors impact this decision, including the size of your taxable estate and projected growth, grandparents or other individuals who may plan to pay tuition directly to lower their taxable estates, and your goals for your wealth as it relates to the next generation.
• Gifts between U.S. citizen spouses qualify for the unlimited marital deduction. However, for non-resident aliens or U.S. resident green card holders, a U.S. citizen spouse may gift up to $185,000 annually in 2024 under the annual exclusion.
• Pay medical and educational expenses directly to providers or institutions to exclude them from gift tax limitations. These payments are uncapped and provide an additional strategy to transfer wealth efficiently.

Reminder: Contributions to 529 Plans, gifts to Irrevocable Life Insurance Trusts (ILITs), or gifts to Irrevocable Grantor Trusts with present interest Crummey Withdrawal rights all count toward your annual gift tax exclusion per recipient. You cannot use the exclusion multiple times for the same individual across different vehicles.

For example, if you have an insurance policy owned by an ILIT where your daughter Susan is the beneficiary, and the annual premium qualifies as a present interest gift of $12,000, this amount uses a portion of your annual exclusion. If you and your spouse elect gift-splitting, you would still have $24,000 of your combined annual exclusion available to give to Susan in 2024. While there are no income tax implications for these gifts, any amount exceeding the annual exclusion will count against your $13.61 million (or $27.22 million for married couples) federal lifetime gift and estate tax exemption.

Evaluate Advanced Estate Planning Techniques

As we step into 2025, it’s crucial for ultra high net worth individuals and families to revisit their estate and wealth transfer strategies to take advantage of current tax laws, prepare for upcoming changes, and maximize wealth preservation across generations. Below are updated and expanded strategies to consider for 2024.

Preparing for the Sunset Provisions

• With the scheduled reduction of the federal estate, gift, and GST exemption amounts in 2026, consider implementing plans now to lock in current exemptions.
• To benefit from the higher exemption threshold, one spouse must use more than half of the current federal lifetime exemption, amounting to at least $7 million.
• If both spouses cannot fully utilize their federal lifetime exemptions today, it is more beneficial for one spouse to use their entire exemption while preserving the other spouse’s exemption.

Increased Federal Estate, Gift, and Generation-Skipping Transfer (GST) Exemption Amounts

• For 2024, the federal estate, gift, and GST applicable exemption amounts have increased to $13.61 million per person (or $27.77 million per married couple), up from $12.92 million in 2023. The maximum federal estate, gift, and GST tax rate remains at 40% for any gift in excess of this threshold.
• Consider utilizing this increased exemption before it potentially sunsets to pre-2018 levels, reverting to an inflation-adjusted amount of approximately $7 million per person at the end of 2025 without further action taken by Congress.

Strategic Gifting

• Growth Assets: Gift assets are expected to appreciate significantly to remove future growth from your taxable estate. Keep in mind, however, that the recipient will lose the benefit of a step-up in cost basis upon your death.
  • Consider Retaining Low Basis Assets: Retaining low-cost basis assets in your estate ensures they receive a step-up in income tax basis upon your death, minimizing income tax for your heirs.
  • Flexible Trust Language: If a trust beneficiary has unused federal lifetime gift tax exemption, consider including provisions that allow the beneficiary to exercise a general power of appointment. This can pull low-cost basis assets into their taxable estate, allowing for a step-up in basis upon the beneficiary’s death. Consult your advisors for a tailored approach.

Addressing Liquidity Concerns While Using Exemptions

For those hesitant to make large gifts out of concern for future liquidity, work with your NewEdge team to conduct an in-depth liquidity analysis. If nothing else, it is advantageous to gift assets at a lower valuation today that have an opportunity to significantly appreciate in the future. Advanced estate planning techniques can be implemented to balance wealth transfer with financial flexibility, including:

• Intra-family Loans: Low-interest loans to family members or trusts to facilitate wealth transfer while retaining some control.
• Installment Sales to Intentionally Defective Grantor Trusts (IDGTs): A tax-efficient strategy to freeze the value of assets for estate tax purposes.
• Grantor Retained Annuity Trusts (GRATs): Transfer asset appreciation to beneficiaries with minimal gift tax.
• Irrevocable Life Insurance Trusts (ILITs): Use life insurance proceeds to provide liquidity to pay estate taxes or equalize inheritances.
• Spousal Lifetime Access Trusts (SLATs): A grantor trust offering asset protection and potential access to funds through a spouse as a beneficiary.

Many grantor trusts allow for flexibility, such as swapping or buying back appreciated assets, borrowing from the trust, or naming a spouse as a permissible beneficiary.

Valuation Discounts

• With the help of a qualified appraiser, consider obtaining valuation discounts for closely held businesses, family limited partnerships (FLPs), and minority interests in LLCs. Discounts for lack of control and lack of marketability can significantly reduce the taxable value for gift and estate tax planning purposes, maximizing the use of your federal lifetime gift tax exemption amounts when gifting.

GST Planning for Existing Trusts

• If you have existing trusts that currently benefit, or will in the future benefit, a skip person (e.g., someone two or more generations below the Grantor or more than 37 ½ years younger than the Grantor), they will likely be subject to GST tax. If you filed a timely gift tax return but did not allocate your GST exemption to the gift, consider using your increased GST exemption for these trusts. This approach can help protect future generations from transfer taxes, especially for trusts designed to span multiple generations.

Equalizing Estates Between Spouses

• For married taxpayers, portability enables the surviving spouse to inherit any unused portion of the deceased spouse’s federal estate tax exemption, helping to increase the couple’s total exemption. However, this benefit applies only to the federal estate tax exemption and does not extend to the unused Generation-Skipping Transfer (GST) exemption or state estate tax exemptions in most states. For married couples, if one spouse’s assets exceed the increased federal exemption amounts and are significantly greater than the other spouse’s assets, it may be beneficial to balance or equalize their estates by transferring assets. This approach ensures both spouses can fully utilize the federal exemption amounts, especially the increased GST exemption, which cannot be transferred to the surviving spouse after the first spouse’s death.
  • Non-Citizen Spouses: Transfers to a non-US citizen spouse do not qualify for the unlimited marital deduction. To avoid gift tax, keep such transfers within the annual gift exclusion limit ($175,000 in 2024) to avoid gift tax.

Qualified Personal Residence Trust (QPRT)

• Use a Qualified Personal Residence Trust (QPRT) to take advantage of the current interest rate environment. A QPRT is an irrevocable trust that allows the grantor to move a real primary or secondary home out of their personal estate. This is done to transfer the home to a future beneficiary with gift tax savings. With a QPRT, the higher the rate, the higher the value of the grantor’s right to use the residence as their own during the term of years and the lower the value of the gift of the future remainder interest.

Forgiveness of Promissory Notes

• If you hold promissory notes from prior estate planning transactions (e.g., family loans), consider using the increased federal lifetime gift tax exemption to forgive these notes. This can simplify estate administration and ensure the note’s value doesn’t remain part of your taxable estate.

As we move forward into 2025, UHNW individuals and families face an evolving landscape that requires careful consideration and proactive planning. With significant tax changes on the horizon, economic uncertainty, and shifting political dynamics, strategic wealth management is more critical than ever. By staying ahead of these changes and leveraging opportunities in liquidity planning, tax planning, estate and wealth transfer planning, charitable giving, business succession planning, risk mitigation, and next-generation education, UHNW individuals can ensure their financial legacy is preserved and aligned with their goals.

Your NewEdge team is here to help you navigate these complexities and tailor strategies to your unique needs. Reach out to us to discuss how these insights apply to your situation and to implement actionable plans for a successful 2024 and beyond.

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SOURCES
Source: Kiplinger – “Estate Tax Exemption Amount Increases for 2024” (November 15, 2023) 2 Source: Schwab Charitable – “Bunching Charitable Contributions” 3 Source: CBS News – “Mortgage Rates are Dropping. Should You Buy a Home Now?” (December 1, 2023)
https://taxfoundation.org/data/all/federal/2024-tax-brackets/
https://taxfoundation.org/data/all/federal/2025-tax-brackets/
https://www.irs.gov/newsroom/irs-releases-tax-inflation-adjustments-for-tax-year-2025
https://www.irs.gov/charities-non-profits/charitable-organizations/charitable-contribution-deductions
IRS Notice 2022-53