As future generations begin taking hold, parents look to support and cultivate their growth with the wealth they themselves have accumulated over their lifetime.
However, there is an estate tax that essentially cuts any funds left for future generations in half if above a certain amount. New tax laws passed by the Trump administration allow for parents to transfer up to $11,500,000 without estate taxes—that’s double the previous limit. However, with Democrats pursuing the demise of the aforementioned tax law coupled with the unavoidable end of this tax provision in 2026, many people are advised to take full advantage of it while they still can. Therefore, it is not unusual for parents to place their money into a trust fund for their children, providing them with ample funds to prepare them for their future even after they are gone. Fortunately, there are many means for one to circumvent or minimize the effects of the estate taxes: GST trust funds and multigenerational dynasty trusts and even FLLC’s.
A GST fund, or “Generation-Skipping transfer-tax Trust,” allows for families to transfer wealth from generation to generation completely exempt from federal estate tax. This ultimately allows for wealth to pass down through multiple generations without any exposure to estate or gift taxes, all while still growing the family’s wealth for generations to come. The wealth is simply transferred from one generation to the next upon death.
As for Multigenerational Dynasty Trusts (MDTs) families can also utilize them to carry their wealth from generation to generation, but without distributing assets to beneficiaries at a set point. These trusts are irrevocable, and only incur taxes upon initial funding, meaning they can build up over time undisturbed.
FLLC’s, or “Family Limited Liability Companies,” is another tax mitigation vehicle. For an FLLC, a Limited Liability Company is created to store assets such as cash, investments, or real estate. Under this structure, control can remain in the hands of the trustor for the rest of their life, but the assets will reside outside of your estate in the LLC, exempt from transfer taxes.
Regardless of the method you decide to utilize, it is crucial to take advantage of current rates and act sooner rather than later. And whether you are worried about losing control of your money or mitigating tax liability, M3 is here to help address your personal financial goals.
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