Five Strategies to Help Protect Your Wealth From Taxes

December 2, 2021
Five Strategies to Help Protect Your Wealth From Taxes

While some of the tax proposals that would have significantly impacted high-net-worth individuals have been eliminated from the Build Back Better bill, others remain. The bill is currently under Senate review. Regardless of the final outcome, here are answers to questions related to transferring your wealth to heirs to help minimize your tax burden.

Q: How Can Giving Gifts to Loved Ones Reduce My Taxable Estate?

A: When you give gifts, such as contributing to a child or grandchild’s 529 plan or giving them a direct cash gift, you reduce your taxable estate.

In 2021, the gift tax exclusion is $15,000. For the first time in several years, it will increase to $16,000 in 2022 as an inflation adjustment.1 That means, this year, you can give annual gifts of up to $15,000 per person ($30,000 for married couples) and in 2022, individuals can give up to $16,000 ($32,000 for married couples).1 There’s no limit to the number of people to whom you can give gifts, and those annual gifts don’t count toward your lifetime gift and estate tax exemptions.

Q: How Can I Maximize a 529 Plan Contribution for My Child?

A: If you are contributing to your child’s 529 plan, you can contribute as much as $75,000 in 2021 if you treat the contribution as if it were spread over a five-year period, also known as “frontloading.”2 Keep in mind you are required to report the five-year election on Form 709 for each of the five years. Depending on the state you live in, you could receive a state tax deduction for 529 plan contributions. And by contributing to a 529 plan, you lower your taxable estate for federal income tax purposes.

Q: How Do Irrevocable Grantor Trusts Reduce My Taxable Estate?

A: Irrevocable grantor trusts remove assets from your taxable estate but are structured so that you own the trust assets for income tax purposes. By having you (grantor) pay the income tax, the trust property remains intact, while further reducing your taxable estate.

The House Ways and Means Committee threatened this type of trust during its deliberations by suggesting that grantor trusts be included in the taxable estate of the grantor upon death, and any distributions to beneficiaries would be subject to gift tax. However, that proposal has been eliminated. That means this type of trust is a viable strategy for reducing your taxable estate and passing wealth to future generations.

Q: How Can I Use an Intra-Family Loan as a Tax Strategy?

A: Making an intra-family loan represents another way you can reduce your taxable estate. The advantages are that you can agree on a lower interest rate for the loan. And if the family member you make the loan to invests the money, it’s possible he or she could earn higher interest. Also, you keep it in the family—the interest the borrower pays goes back to you as the one making the loan, rather than to a third-party lender. These types of loans can cause family conflict, so consult with your wealth team to see if it makes sense. Your estate planning attorney can create the proper documents should you choose to make the loan, and everyone involved needs to be clear on the requirements—it’s still a loan that has to be repaid, not a gift.

Q: What Are the Advantages of Donating Appreciated Securities?

A: If you’d like to give back to a nonprofit, to benefit from a tax write off on the full amount, consider donating appreciated securities. This way you avoid selling the securities yourself, paying tax on any gains, then having less cash to donate to a charity.

Q: Does a Qualified Charitable Deduction (QCD) Count Toward My RMD?

A: Yes. When you make a QCD, it can satisfy the required minimum distribution (RMD) that you have to take once you turn age 72. Keep in mind, when you use a qualified charitable deduction (QCD) to donate to a charity, you are limited to $100,000 a year, and the distribution must be a direct transfer from a taxable IRA to the eligible charity.3 A QCD reduces your adjusted gross income.

Q: How Much Can I Contribute to My Retirement Accounts Pre-Tax?

A: In 2021, you can contribute a maximum of $19,500 and $20,500 in 2022 to a 401(k) plan. For both years, if you are age 50 or older, you can contribute an additional $6,500.4 And, for both 2021 and 2022, you can contribute a maximum of $6,000 to a traditional IRA pre-tax plus an additional $1,000 if you are age 50 or older.5

Consult With Your Wealth Team

At Mariner Wealth Advisors, your wealth advisor, trust, estate planning and tax team are in-house and will work together to implement wealth management tax strategies for you by year-end and into 2022.

Tax Guide 2022

Tax Guide: Your Resource for Year-Round Tax-Efficient Investing

Year-round planning with an advisor could help improve your overall wealth plan. Find out more by downloading our tax guide.


1“Frequently Asked Questions on Gift Taxes”

2 “How Much Can You Contribute to a 529 Plan?”

3What Is a Qualified Distribution?”

4“401(k) Plans-Deferrals”

5“Traditional and Roth IRAs”

Investors should consider the investment objectives, risks, charges, and expenses associated with 529 plans before investing. More information about specific 529 plans is available in each issuer’s official statement, which should be read carefully before investing.

The availability of tax or other benefits may be conditioned on meeting certain requirements, such as residency, purpose for or timing of distributions, or other factors as applicable.

The information contained herein is not intended to be personal legal, investment or tax advice or a solicitation to buy or sell any security or engage in a particular investment strategy. Nothing herein should be relied upon as such. The information contained herein is current as of 2021 and has been obtained from sources believed to be reliable, but Mariner Wealth Advisors does not warrant the accuracy of the information. The views expressed are for commentary purposes only and do not take into account any individual personal, financial, or tax considerations. There is no guarantee that any claims made will come to pass. Consult a financial, tax or legal professional for specific information related to your own situation. Some services listed in this piece are provided by affiliates of MWA and are subject to additional fees. Additional fees may also apply for tax planning and preparation services. The tax laws discussed are proposed at the time and any final laws or regulations passed may vary significantly from the proposed. Tax laws and regulations are complex and subject to change, and we cannot guarantee that the information herein is accurate, complete, or timely. Any changes to the proposed may also affect any illustrations used in this article.

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