Sponsor spotlight: How to leverage tax season for your estate planning advantage

Start with Reviewing Your Financial Assets and Estate Plan

Tax season is not just a time to fulfill obligations to the IRS; it is also an excellent opportunity to review and adjust your estate plan. With the current tax laws and the complexity of individual financial situations, it is essential to ensure that your estate plan aligns with your personal goals and the ever-evolving tax environment.

Tax season is a reminder for everyone to get their financial house in order. For individuals with estate plans, it is also a pivotal time to reassess your plan’s efficiency in light of current tax laws and personal circumstances.

This reassessment is crucial for multiple reasons:

1. Personal circumstances evolve: Changes in your family structure, financial situation, or health can necessitate updates to your estate plan.

2. Opportunity for optimization: A review can uncover opportunities to reduce tax liabilities and enhance the benefits to your heirs and favored causes, or provide you with the motivation to travel more (also reducing your estate and any estate tax burden).

3. Tax laws change: Legislative changes can impact various components of your estate plan, from Trusts to Wills and Durable Powers of Attorney, affecting your income tax and estate tax liabilities, and beneficiaries’ potential income tax liabilities.

After Reassessment, Begin Aligning Your Estate Plan with Tax Changes.

A key aspect of leveraging tax season for your estate planning advantage involves aligning your estate plan with the latest tax changes, and verifying that your financial assets fit into that plan. This alignment ensures that your plan is both compliant with current laws and optimized for tax efficiency.

Here are strategies to consider:

Stay informed on tax laws: To ensure your estate plan remains both effective and efficient, staying updated on the latest tax laws is crucial. This includes both federal regulations and specific state-level statutes that can significantly impact your estate planning strategies. For residents of Washington, it is particularly important to be informed about the state’s estate tax laws. Washington’s estate tax exemption is set at $2,193,000 for the year. While this figure provides a benchmark, the actual impact on your estate plan can vary widely based on numerous factors, such as either spouse owning a significant amount of separate property, having low basis assets, owning singular assets that are hard to transfer in a tax efficient manner (traditional retirement accounts, family business, etc.), among other considerations.

Washington also has a capital gain tax now, which can drastically alter your financial and estate plan goals.

Consult with professionals: Engage with your estate planning attorney, tax advisor, and financial advisor to discuss potential impacts of recent tax changes on your estate plan. They can provide tailored advice and suggest adjustments.

RMDs and Charitable Giving: An often-overlooked strategy involves using your Required Minimum Distributions (RMDs) for charitable giving. This move can satisfy your RMD requirement without increasing your taxable income. This strategy not only fulfills philanthropic goals but also mitigates tax impacts, potentially placing you in a more favorable tax bracket while reducing the size of your taxable estate.

Annual Exclusion Gifts: The annual gift tax exclusion is a helpful tool for managing estate taxes by allowing the tax-free transfer of wealth to multiple recipients each year. In 2025, the IRS increased this exclusion amount to $19,000 per recipient, up from $18,000 in 2024. By utilizing this higher exclusion limit, individuals can effectively reduce the size of their taxable estate over time, which can lead to significant savings in estate taxes at the time of their death. This strategy is particularly advantageous for those looking to support family members or friends financially while simultaneously managing their estate’s tax exposure.

Checklist for Estate Planning at Tax Season

Here is a short list of key items for reviewing your estate plan at tax season:

Review your estate plan documents: Ensure that all documents reflect your current wishes and that beneficiary/transfer on death designations are up to date.

Analyze your fiduciaries and beneficiaries: Have their been any big changes? Financial, divorce, births, deaths, or simply changes in known values or desires?

Assess your financial situation: Evaluate your personal assets, liabilities, and any changes to your financial situation that may affect your estate plan.

Consider tax law changes: Analyze how any recent tax law changes may impact your estate plan and explore opportunities for optimization.

Meet with your estate planning team: Schedule consultations with your attorney, tax advisor, and financial planner to discuss adjustments to your estate plan based on the latest tax laws and your current financial situation.

Implement strategic charitable giving: Explore using RMDs, annual gifting, Irrevocable life Insurance Trusts, or contributions to 529 plans to reduce taxable income and support your goals.

Alternatively, Implement Gifting to Family Members: Explore your financial needs, future financial forecast, and the viability or desirability of beginning to transfer your wealth now to avoid estate tax and/or Medicaid spend downs.

Tax season is an ideal time to review and adjust your estate plan, ensuring it aligns with current tax laws and your personal objectives. By taking a proactive approach, particularly through strategic charitable giving and reassessment of your plan, you can enhance your estate’s tax efficiency and leave a lasting legacy that reflects your values and goals.

Salish Elder Law

51 W. Dayton St., Suite 204

Edmonds, WA 98020

425-492-7212