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A must-have guide to making informed decisions for your financial future
Staying ahead in an ever-changing economic landscape is essential to wealth preservation. That's why we annually update this guide to help high net worth individuals and families navigate the complexities and make informed financial decisions. Whether you're looking to improve your tax situation, diversify your investments, or plan your estate, our guide offers practical steps and advice that may help you achieve your goals.
As the Trump administration's policies take shape, it's important to stay informed and adapt strategies accordingly. Working with trusted tax professionals and financial advisors may help you enhance your tax positions, protect your wealth, and identify new opportunities in this dynamic environment.
Key tax planning considerations for the 2025 tax season
Consult your financial and tax advisors to explore tax planning strategies based on your unique circumstances. Our guide can be used as a reference for these conversations.
- Intra-family loans and mortgages
- Intentionally defective grantor trust (IDGT)
- Grantor retained annuity trust (GRAT)
- Charitable lead trust (CLT)
- Sale of a private annuity
- Reinstated tax provisions for businesses
- Converting a traditional IRA to a Roth IRA
Intra-family loans and mortgages
In a high-interest-rate environment, intra-family loans and mortgages are worth considering. Rather than making gifts, loaning cash to family members can save on transfer taxes. Even with high rates, family loans at the minimum required rate may be cheaper than market rates.
Intentionally defective grantor trust (IDGT)
An IDGT is an irrevocable trust with tax benefits, treated as a grantor trust for federal income taxes. The grantor can gift to the trust, or sell property to the trust, in exchange for an installment note bearing interest at the Applicable Federal Rate (AFR). Note: The trust may require a “seed” gift, or if it allows asset substitution, the grantor may swap undervalued personal assets with trust assets.
Grantor retained annuity trust (GRAT)
A grantor retained annuity trust (GRAT) is a useful tool for transferring asset growth to the next generation. It allows growth above the Section 7520 interest rate to be passed on, making it ideal for high-growth potential assets. GRATs are low risk even if assets do not surpass the hurdle rate.
Charitable lead trust (CLT)
Individuals interested in philanthropy may consider utilizing a charitable lead trust (CLT) to facilitate annual transfers to one or more charitable organizations over a designated period. This strategy can potentially allow for the appreciation of trust assets to benefit future generations while minimizing transfer tax implications. CLTs are especially advantageous for assets with significant appreciation potential.
Sale of a private annuity
Another consideration is the sale of a private annuity, wherein property is transferred in exchange for an unsecured promise to make periodic payments to the transferor for their lifetime. The annuity amount is determined by the fair market value of the conveyed property, the transferor's life expectancy, and the Applicable Federal Rate at the time of the transaction.
Reinstated tax provisions for businesses
Certain business-related provisions of the 2017 tax reform act were temporarily modified or suspended by the CARES Act. It’s important to be aware of the key changes reverting to the original 2017 tax reform act including the reinstatement of the limitation on excess business losses, the elimination of carrybacks for specific net operating losses, and the Section 163(j) interest deduction limitations, among other adjustments.
Converting a traditional IRA to a Roth IRA
Roth IRAs have gained attention for good reasons. Converting a traditional IRA to a Roth IRA means paying immediate income tax on converted assets. This is appealing for low-value IRAs expected to grow, like shares in a promising young company. Consider your situation and consult a tax advisor to potentially improve tax savings.
IRS targets high-income, high-wealth individuals
The IRS is stepping up its game, focusing on high-income earners who haven't filed their taxes since 2017. This crackdown includes individuals with incomes ranging from $400,000 to over $1 million.
In February 2024, the IRS began investigating 125,000 high-income, high-wealth cases based on third-party information, such as W-2s and 1099s, indicating income but no tax return filed. They have also reached out to around 1,600 taxpayers with incomes exceeding $1 million who owe more than $250,000 in taxes. So far, they've collected an impressive $1.1 billion from 1,200 cases. Consider consulting a tax professional if you haven't filed your taxes in recent years, especially if your income falls within the IRS's current focus range.
Considerations for a family office
Thinking about setting up a family office? It could be a smart move for high net worth families looking to manage their wealth efficiently. A family office brings together estate and tax planning, investment management, legal services, and more under one roof. This setup aims to ensure your short-term needs are met while aligning with your long-term goals. Explore various family office structures, their capabilities, and potential solutions to common challenges in establishing a family office.
Setting up a family office
Start by defining your strategy and desired legacy. Then, align your family office's functions to support this vision.
Three-circle model of the family business system
Business continuity and succession planning for a family business
Planning for a smooth transition in a family business can feel overwhelming, but it’s key for long-term success. By aligning personal legacies with a shared vision, families can often make decisions that benefit everyone involved. Discover the three main types of succession—leadership, board, and ownership—and explore important planning considerations for each.
About PwC’s guide to tax and wealth planning
PwC's trusted guide to tax and wealth planning is regularly updated to provide tax planning insights that may help you secure your family's future and manage your wealth. The guide covers various tax-related topics and policies and offers information on setting up and maintaining a family office, along with strategies that could assist with business continuity and succession planning in family businesses.
Stay informed and ahead with our latest tax insights
We are committed to staying abreast of the dynamic tax policy changes in Washington, D.C., and we are dedicated to sharing timely updates as they transpire. For the latest insights on these pivotal matters, please visit PwC’s tax research and insights webpage for updates.
We invite you to engage with us when exploring the content presented in our guide. Our specialists are eager to discuss how these strategies can be customized to your specific needs and goals.
Sheryl Eighner, US Personal Financial Services Leader
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PwC wins ‘Solutions for International Americans’ award at Family Wealth Report Awards 2023
PwC is recognized for helping individuals and families to manage various complexities and country jurisdictions as cross-board liaisons, thanks to our global network of firms and experience covering 150+ jurisdictions.
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