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Tax and wealth transfer strategies from the UBS Advanced Planning Group
When it comes to planning for important goals, making informed choices is key. Now is a good time of year to get on top of your planning.
Federal and state income and wealth transfer taxes can be complex, and they affect income tax planning, retirement planning and estate planning. Even Albert Einstein reportedly said, "The hardest thing in the world to understand is income taxes.”1
To help you plan effectively, we highlight a few strategies to consider as you pursue your wealth planning goals.
How well are you navigating a complex tax landscape?
A key aspect of planning involves the gift and estate tax exemption, which is often referred to as the lifetime exemption. Beginning in 2018, the lifetime exemption was temporarily increased. Because of this change, the 2025 exemption amount is $13.99 million per person.3
Unless Congress takes action to extend this increase, the lifetime exemption in 2026 will be about one-half of what it was this year.4
To the extent you haven’t used this additional amount before it expires, you will lose that tax benefit. To the extent you have used the additional amount, it generally won’t adversely affect the amount of gift and estate taxes you will be subject to after the temporary addition expires.5
You may want to consider using exemptions this year. If you wish to reduce your estate for estate tax purposes, for example, you might want to consider making gifts that use your lifetime exemption before the lifetime exemption decreases after 2025. This would potentially remove from your estate any future appreciation on the money or property that you give away and allow you to take advantage of the current higher exemption.
UBS Advanced Planning senior wealth strategists discuss insights from the 2025 Planning Guide.
Advanced Planning senior wealth strategists discuss the annual lifetime exemption, the use of spousal lifetime access trusts, valuation discounts and more from this year’s comprehensive planning guide.
When making gifts that use your lifetime exemption, you might want to consider making gifts into an irrevocable trust, either for the benefit of your spouse and descendants or just your descendants.6
Using a trust may offer important advantages. A trust can potentially insulate trust property from the claims of a beneficiary’s creditors (including a spouse or former spouse), and it can potentially keep the trust property out of a beneficiary’s estate for estate tax purposes. A trust, however, requires proper administration, which involves some time and expense.
An individual who spends time in multiple states might wish to assess whether they could be treated as a resident in more than one of those states. States have different standards for determining whether someone is a resident, and the standard for income tax purposes sometimes differs from the standard for estate tax purposes.
In some cases, your domicile (where you intend to live indefinitely) is more relevant than your residency (generally where you are physically present). For income tax purposes, residency sometimes is based strictly on physical presence (i.e., a day-count test). Other times, other factors are relevant (e.g., whether the individual rents or owns an apartment, house, or other dwelling in the state). By managing residency—including whether and when to change residency—you potentially can avoid unexpected taxes.
For more information about income tax provisions scheduled to sunset at the end of 2025 and other important tax-efficient strategies for your annual wealth planning, download our comprehensive Planning Guide 2025.
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The Advanced Planning Group consists of former practicing estate planning and tax attorneys with extensive private practice experience and diverse areas of specialization, including estate planning strategies, income and transfer tax planning, family office structuring, business succession planning, charitable planning and family governance.
1. Leo Mattersdorf, Letter to the Editor, Time, February 22, 1963.
2. Rev. Proc. 2023-34. This assumes the individual is a US citizen or otherwise a US person for gift and estate tax purposes.
3. IRC §§ 2010(c) and 2502(a). See Rev. Proc. 2024-40. This assumes the individual is a US person for gift and estate tax purposes
4. IRC § 2010(c)(3)(C).
5. IRC § 2010(c)(3)(C).
6. Treas. Reg. § 25.2503-2(a) (a gift in trust is generally treated as a gift to the beneficiaries of the trust).
7. See IRC § 63(c).
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Purpose of this material.
The information on this page and in the attached document is provided for informational and educational purposes only. It should be used solely for the purposes of discussion with your UBS Financial Advisor and your independent consideration. UBS does not intend this to be fiduciary or best interest investment advice or a recommendation that you take a particular course of action.
No tax or legal advice.
UBS Financial Services Inc., its affiliates and its employees do not provide tax or legal advice. You should consult with your personal tax and/or legal advisors regarding your particular situation.
