FAQ Friday: Young Professionals
On Friday, February 2nd, attorney Steven M. Berger discusses Rethinking Estate Planning for Young Professionals.
This is orientated toward those who might have a little extra money put aside and are thinking into their future about how to provide for their children.
The exemption is not meant to be increased, but there are rising wages and rising interest rates.
One option being discussed is to overfund 529 plans for your children. If you’ve had money in a 529 for 5 years, you can convert up to $35,000 into a Roth IRA.
IRA’s are still subject to a max of $6500 contributions. So the idea is to put in as much as possible to the 529 while your kids are young. Instead of depleting the accounts, maybe you pay some of the tuition and expenses out of pocket separately in order to leave $35,000 in the 529 plan when all is said and done.
This $35,000 can be a really nice nest egg to get your children started on a Roth IRA maybe when they are about 23 years old.
Another strategy is to get an irrevocable life insurance trust. This would be outside of your estate and not subject to income tax.
A third strategy is to have your parents setup your inheritance from them in a dynasty trust with the idea that they will provide enough exemptions that some can also pass to their grandchildren. This also keeps it out of your estate.
A fourth option is to provide large gifts to irrevocable trusts. Large enough that it makes it worth it to file a gift tax return and for your child to file a 1041 each year. This can be especially beneficial when you have company stock.
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