The exemption window

The current federal estate and gift tax exemption sits at approximately $15 million per individual, or $30 million per married couple. It is not permanent. The exemption is subject to legislative change, and any administration committed to reducing it would bring it down to its prior baseline of roughly $7 million per individual.

For a couple with a $20 million estate, that shift exposes the entire estate to a 40 percent federal estate tax rate on amounts above the reduced exemption. The IRS has confirmed that exemption amounts used through completed gifts are preserved regardless of future legislative changes. Structures funded and gifts completed under the current exemption lock in that exemption permanently.

We design every Estate Architecture engagement around the legal landscape that exists today, not assumptions about what Congress will or will not do. Owners who act now preserve options that may not exist if the exemption is reduced. Owners who wait may find those options are gone.

Irrevocable Life Insurance Trusts (ILITs)

An Irrevocable Life Insurance Trust is a trust created to own a life insurance policy on the grantor’s life, with the death benefit paid to the trust rather than to the grantor’s estate. Because the trust owns the policy, the death benefit is excluded from the taxable estate entirely, removing what is often one of the largest single estate-tax exposures a family carries.

The ILIT is funded through annual gifts from the grantor to the trust, which the trustee uses to pay policy premiums. Those gifts are sheltered by the annual gift tax exclusion through Crummey withdrawal rights, which give beneficiaries a temporary right to withdraw their share of each contribution. A properly maintained ILIT runs for decades with no further attention from the grantor.

Spousal Lifetime Access Trusts (SLATs)

A Spousal Lifetime Access Trust is an irrevocable trust created by one spouse for the benefit of the other spouse and descendants. The grantor spouse uses federal gift tax exemption to fund the trust. The assets and all future growth are removed from the grantor’s estate. The beneficiary spouse can receive distributions from the trust, preserving indirect household access to the gifted assets.

A married couple with $20 million in assets can fund two SLATs and remove the combined current exemption from their estates entirely. The reciprocal trust doctrine requires the two SLATs to be sufficiently different to be respected as separate transactions: differing trustees, distribution standards, beneficiary classes, and funding dates are typical. We model the access-loss scenarios so the decision to fund a SLAT is made with full understanding of the tradeoffs.

Grantor Retained Annuity Trusts (GRATs)

A Grantor Retained Annuity Trust transfers an appreciating asset to an irrevocable trust in exchange for a fixed annuity stream payable back to the grantor over a defined term. If the asset appreciates faster than the IRS Section 7520 rate during the GRAT term, the appreciation passes to the remainder beneficiaries entirely outside the grantor’s estate with no gift tax cost.

A zeroed-out GRAT structures the annuity payments to equal the entire initial value plus the Section 7520 rate. The gift to remainder beneficiaries is zero, and all outperformance transfers to the next generation at no gift tax cost. We design GRATs in a rolling sequence across staggered terms and multiple assets, so a portion of the family’s appreciating wealth is continuously moving outside the estate.

Dynasty trusts and generation-skipping transfer planning

A dynasty trust is a long-duration irrevocable trust designed to hold and transfer wealth across multiple generations without incurring estate or generation-skipping transfer tax at each generational change. The trust uses the grantor’s federal GST tax exemption to shield growth from GST tax for as long as the trust legally exists.

Several states, including Nevada, South Dakota, and Delaware, have abolished or substantially extended the rule against perpetuities, allowing trusts to continue effectively in perpetuity. We typically site dynasty trusts in those jurisdictions when the family is willing to engage a non-resident trustee. The choice of situs affects creditor protection, state income taxation of trust income, and the practical ease of administration over decades.

Family Limited Partnerships and valuation discounting

A Family Limited Partnership holds and manages family assets, with family members owning partnership interests rather than the underlying assets directly. Because limited partnership interests carry restrictions on transferability and lack of control, qualified appraisers routinely apply discounts of 25 to 40 percent to those interests when gifted, sold, or included in an estate.

The IRS scrutinizes FLPs closely. Structures funded shortly before death, with no meaningful non-tax purpose, or where assets continue to be treated as personal property are routinely challenged. A properly designed FLP has a real business purpose, real operational activity, genuine respect for entity formalities, and a documented non-tax rationale. When those elements are present, the discounts are sustained.

Coordination across the structure

None of these structures work in isolation. An ILIT funded with permanent life insurance pays a death benefit that needs a designed home, often a dynasty trust. A SLAT funded with closely-held business stock interacts with the Section 1202 QSBS plan of the operating company. A GRAT loaded with appreciating real estate may need a separate Qualified Personal Residence Trust if the property is the family residence.

We design Estate Architecture as one element of an integrated tax engineering plan that also addresses entity design, the qualified account problem, executive compensation, and the eventual business exit. The structure is durable when the components reinforce each other. It is fragile when they are bolted on after the fact.

When this work makes sense

Best suited for individuals and families with a taxable estate of $15 million or more. The structures on this page require coordinated work with trust counsel, valuation experts, and the family’s existing advisory team, and are designed to remain in place over decades. Owners with estates between $7 million and $15 million per individual have the most to gain from acting under the current exemption before it is reduced.