Here at Money Mile, we help active, time-crunched people increase their confidence in their finances while increasing their fitness. We focus on educating runners and triathletes who are looking forward to an engaged, phased financial independence and who are ultimately interested in leaving a meaningful legacy.

Today, we’ll focus on the legacy aspect of financial planning. We have discussed estate planning already at the sprint distance and Olympic levels, but as with triathlon, the way you prepare for each race is different depending on your course. Come join me in learning about estate planning at the long course level.

You will want to hear this episode if you are interested in…

How estate taxes work

Many people think that estate planning is only for the rich and famous, and it is true that estate planning impacts the ultra-wealthy a bit differently.

If your estate is over $12.9 million, presently, the amount over that threshold will be subject to estate tax. The tax starts at 18% and goes quickly up to 40%. This is the reason that one of your priorities should be to try to get the estate you pass on to your heirs at your death to be below that threshold.

There are some changes already on their way that will significantly impact this. The Tax Cuts and Jobs Act will expire in 2025, so this ~$13 million exemption is going to go down to between $5-7 million.

Therefore, if you had accumulated $10 million in your estate and you passed away before 2026, your estate won’t be subject to estate taxes. If you pass away with $10 million in 2026, the first ~$6 million would pass without an estate tax, but about $4 million over that would be subject to a tax that escalates to 40% very quickly. That means that your estate could lose as much as $1.6 million dollars.

Strategies to avoid extra estate taxes

So, how can you avoid having your heirs lose 40% of your wealth to Uncle Sam?

While there are advanced strategies that the ultra-rich use, we’ll focus on the more common strategies available to everyone.

Lifetime gifting is an excellent, tax-free way to give to your heirs before you pass. You (and your spouse) can gift $17,000 per year to anyone you wish without penalty.

Another way to give is by giving the gift of education. You can pay tuition directly to the school or give in a 529 plan. If your loved ones have any medical expenses you can pay them directly to the hospital or provider. Listen in to hear how to use forgivable loans if you are interested in giving more money at one time.

Your homework

While many times the goal is to leave a meaningful legacy to your heirs, it’s up to you to decide what is meaningful. A well-designed estate plan does not come cheap, but it is worth spending the money upfront since an estate plan left to probate quickly diminishes its value.

Consider whether you need to step up your estate planning game with a trust. If so, contact an estate planning attorney to get started. Remember, we’re not striving to be perfect once, we are working towards continuous improvement. Get to work on your estate plan now so that you can continue to improve. Start by listening to this episode.

Resources & People Mentioned

Connect With Justin Waller

Subscribe to MONEY MILE

Audio Production and Show Notes by – PODCAST FAST TRACK