Designing the right bonus plan for your business

The One Big Beautiful Bill Act (OBBBA) introduced or updated numerous business-related tax provisions. The changes that are likely to have a major impact on employers and payroll management companies include new information return and payroll tax reporting rules. Let’s take a closer look at what’s new beginning in 2026 — and what businesses need to do in 2025. Increased reporting thresholds go into effect in 2026 Businesses generally must report payments made during the year that equal or exceed the reporting threshold for rents; salaries; wages; premiums; annuities; compensation; remuneration; emoluments; and other fixed or determinable gains, profits and income. Similarly, recipients of business services generally must report payments they made during the year for services rendered that equal or exceed the statutory threshold. This information is reported on information returns, including Forms W-2, Forms 1099-MISC and Forms 1099-NEC. Currently, the reporting threshold amount is $600. For payments made after 2025, the OBBBA increases the threshold to $2,000, with inflation adjustments for payments made after 2026. Reporting qualified tip income and qualified overtime income Effective for 2025 through 2028, the OBBBA establishes new deductions for employees who receive qualified tip income and qualified overtime income. Because these are deductions as opposed to income exclusions, federal payroll taxes still apply to this income. So do federal income tax withholding rules. Also, tip income and overtime income may still be fully taxable for state and local income tax purposes. The issue for employers and payroll management companies is reporting qualified tip and overtime income amounts so that eligible workers can claim their rightful federal income tax deductions. In August, the IRS announced that for 2025 there will be no OBBBA-related changes to federal information returns for individuals, federal payroll tax returns or federal income tax withholding tables. The 2025 versions of Form W-2, Forms 1099, Form 941, and other payroll-related forms and returns will be unchanged. Nevertheless, employers and payroll management companies should begin tracking qualified tip and overtime income immediately and implement procedures to retroactively track qualified tip and overtime income amounts that were paid going back to January 1, 2025. The IRS will provide transition relief for 2025 to ease compliance burdens. Proposed regulations list tip-receiving occupations In September, the IRS released proposed regs that include a list of tip-receiving occupations eligible for the OBBBA deduction for qualified tip income. Eligible occupations are grouped into eight categories: Beverage and food services, Entertainment and events, Hospitality and guest services, Home services, Personal services, Personal appearance and wellness, Recreation and instruction, and Transportation and delivery. The IRS added three-digit codes to each eligible occupation for information return purposes. 2026 Form W-2 draft version The IRS has released a draft version of the 2026 Form W-2. It includes changes that support new employer reporting requirements for the employee deductions for qualified tip income and qualified overtime income and for employer contributions to Trump Accounts, which will become available in 2026 under the OBBBA. Specifically, Box 12 of the draft version adds: Code TA to report employer contributions to Trump Accounts, Code TP to report the total amount of an employee’s qualified cash tip income, and Code TT to report the total amount of an employee’s qualified overtime income. Box 14b has been added to allow employers to report the occupation of employees who receive qualified tip income. Stay on top of the latest guidance The OBBBA makes some significant changes affecting information returns and payroll tax reporting. The IRS will likely continue to issue guidance and regulations. We can help you stay informed on any developments that will affect your business’s reporting requirements. © 2025 

As the end of the year approaches, many people give more thought to supporting their favorite charities. If you’re charitably inclined and you itemize deductions, you may be entitled to deduct your charitable donations. Note that the key word here is “may” because there are certain limitations and requirements your donations must meet. To be eligible to claim valuable charitable deductions, you must substantiate your gifts with specific documentation. Here’s a breakdown of the rules. Cash donations Cash donations of any amount must be supported by one of two types of documents that display the charity’s name, the contribution date and the amount: 1. Bank records. These can include bank statements, electronic fund transfer receipts, canceled checks (including scanned images of both sides of a check from the bank’s website) or credit card statements. 2. Written communication. This can be in the form of a letter or email from the charity. A blank pledge card furnished by the charity isn’t sufficient. In addition to the above, cash donations of $250 or more require a contemporaneous written acknowledgement (CWA) from the charity that details the following: The contribution amount, and A description and good faith estimate of the value of any goods or services provided in consideration (in whole or in part) for the donation. A single document can meet both the written communication and CWA requirements. For the CWA to be “contemporaneous,” you must obtain it by the earlier of 1) the extended due date of your tax return for the year the donation is made, or 2) the date you file your return. If you make charitable donations via payroll deductions, you can substantiate them with a combination of an employer-provided document — such as Form W-2 or a pay stub — that shows the amount withheld and paid to the charity, and a pledge card or similar document prepared by or at the direction of the charity showing the charity’s name. For a donation of $250 or more by payroll deduction, the pledge card or other document must also state that the charity doesn’t provide any goods or services in consideration for the donation. Noncash donations If your noncash donation is less than $250, you can substantiate it with a receipt from the charity showing the charity’s name and address, the date of the contribution, and a detailed description of the property. For noncash donations of $250 or more, there are additional substantiation requirements, depending on the size of the donation: Donations of $250 to $500 require a CWA. Donations over $500, but not more than $5,000, require a CWA and you must complete Section A of Form 8283 and file it with your tax return. Section A includes a description of the property, its fair market value and the method of determining that value. Donations over $5,000 require all the above, plus you must obtain a qualified appraisal of the property and file Section B of Form 8283 (signed by the appraiser and the charity). There may be additional requirements in certain situations. For instance, if you donate art of $20,000 or more, or if any donation is valued over $500,000, you must attach a copy of the appraisal to your return. Note: No appraisal is required for donations of publicly traded securities. Additional rules may apply for certain types of property, such as vehicles, clothing and household items, and privately held securities. Charitable giving in 2026 Generally, charitable donations to qualified organizations are fully deductible up to certain adjusted gross income (AGI)-based limits if you itemize deductions. The One Big Beautiful Bill Act (OBBBA) creates a nonitemizer charitable deduction of up to $1,000, or $2,000 for joint filers, which goes into effect in 2026. Only cash donations qualify. Also beginning in 2026, a 0.5% floor will apply to itemized charitable deductions. This generally means that only charitable donations in excess of 0.5% of your AGI will be deductible if you itemize deductions. So, if your AGI is $100,000, your first $500 of charitable donations for the year won’t be deductible. Contact us for help developing a charitable giving strategy that aligns with the new rules under the OBBBA and times your gifts for maximum impact. Make charitable gifts for the right reasons For most people, saving taxes isn’t the primary motivator for making charitable donations. However, it may affect the amount you can afford to give. Substantiate your donations to ensure you can claim the deductions you deserve. If you’re unsure whether you’ve properly substantiated your charitable donation, contact us. © 2025 

For 2025 through 2028, individuals age 65 or older generally can claim a new “senior” deduction of up to $6,000 under the One Big Beautiful Bill Act (OBBBA). But an income-based phaseout could reduce or eliminate your deduction. Fortunately, if your income is high enough that the phaseout is a risk, there are steps you can take before year end to help preserve the deduction. Senior deduction basics You don’t have to be receiving Social Security benefits to claim the senior deduction. If you’re age 65 or older on December 31 of the tax year, you’re potentially eligible. If both spouses of a married couple filing jointly are age 65 or older, each spouse is potentially eligible for the $6,000 deduction, for a combined total of up to $12,000. But you must file a joint return; married couples filing separately aren’t eligible. Combining the senior and standard deductions Taxpayers age 65 or older already are eligible for an additional standard deduction on top of the basic standard deduction. The following examples illustrate how large the three deductions can be on a combined basis for 2025: Single filer. An unmarried individual age 65 or older can potentially deduct a total of up to $23,750: $15,750 for the basic standard deduction plus $2,000 for the additional standard deduction for a senior single filer plus $6,000 for the new senior deduction. Joint filer. If both members of a married couple are age 65 or older, they can potentially deduct a total of up to $46,700: $31,500 for the joint filer basic standard deductions plus two times $1,600 for the additional standard deductions for senior joint-filers plus two times $6,000 for the new senior deduction. How the phaseout works The senior deduction begins to phase out when modified adjusted gross income (MAGI) exceeds $75,000 for single filers or $150,000 for joint filers. The deduction is eliminated when MAGI exceeds $175,000 or $250,000, respectively. Specifically, the deduction is phased out by 6% of the excess of your MAGI over the applicable phaseout threshold. For this purpose, MAGI means your “regular” AGI increased by certain tax-exempt offshore income (which most taxpayers don’t have). Here are two examples: Example 1. For 2025, you’re a single individual age 65 or older. Your MAGI for the year is $130,000. Under the phaseout, your senior deduction is reduced by $3,300 [6% × ($130,000 − $75,000)]. So your senior deduction is $2,700 ($6,000 − $3,300). Example 2. For 2025, you and your spouse file jointly. You’re both age 65 or older. Your MAGI for the year is $220,000. Under the phaseout rule, your two senior deductions are reduced by $4,200 each [6% × ($220,000 − $150,000)]. So your senior deduction is $1,800 each ($6,000 − $4,200), or $3,600 on a combined basis. Year-end planning tips If you’re concerned your 2025 MAGI could exceed the applicable phaseout threshold — or that your senior deduction could be completely phased out — there are moves you can make by December 31 to help maximize your deduction. Specifically, take steps to reduce your MAGI. Here are some potential ways to do it: Harvest capital losses in taxable brokerage accounts to offset capital gains that would otherwise increase your MAGI. Defer selling appreciated securities held in taxable brokerage accounts to avoid increasing your MAGI by the capital gains you’d recognize if you sold them. If you’re still working, maximize salary-reduction contributions to tax-deferred retirement accounts, like your traditional 401(k), which will reduce your MAGI. Defer or spread out Roth IRA conversions over several years, because your MAGI will be increased by taxable income triggered by the conversions. If you’re age 73 or older and thus subject to required minimum distributions (RMDs) on your traditional IRA(s), consider making IRA qualified charitable distributions (QCDs). Done properly, the QCDs will count toward your RMD and will be excluded from your taxable income and your MAGI. Depending on your situation, there may be other moves you can make that will reduce your MAGI. A valuable tax saver The new senior deduction can be a valuable tax saver for eligible taxpayers. Please contact us with any questions you have. We can help you determine the best year-end tax planning strategies for your particular situation. © 2025 

If you have employees who travel for business, you know how frustrating it can be to manage reimbursements and the accompanying receipts for meals, hotels and incidentals. To make this process easier, consider using the “high-low” per diem method. Instead of tracking every receipt, your business can reimburse employees using daily rates that are predetermined by the IRS based on whether the destination is a high-cost or low-cost location. This saves time and reduces paperwork while still ensuring compliance. In Notice 2025-54, the IRS announced the high-low per diem rates that became effective October 1, 2025, and apply through September 30, 2026. How the per diem method works The per diem method provides fixed travel per diems rather than requiring employees to save every meal receipt or hotel bill. Employees simply need to document the time, place and business purpose of their trip. As long as reimbursements don’t exceed the applicable IRS per diem amounts, they aren’t treated as taxable income to the employee and don’t require income or payroll tax withholding. Under the high-low method, the IRS establishes an annual flat rate for certain areas with higher costs. All locations within the continental United States that aren’t listed as “high-cost” are automatically considered “low-cost.” The high-low method may be used in lieu of the specific per diem rates for business destinations. Examples of high-cost areas include Boston and Los Angeles. But many locations are considered high-cost during only part of the year. Some of these partial-year locations are resort areas, while others are major cities where costs may be lower for, say, some of the colder months of the year, such as New York City and Chicago. Under some circumstances — for example, if an employer provides lodging or pays the hotel directly — employees may receive a per diem reimbursement only for their meals and incidental expenses. There’s also a $5 incidental-expenses-only rate for employees who don’t pay or incur meal expenses for a calendar day (or partial day) of travel. The new high-low per diems For travel after September 30, 2025, the per diem rate for high-cost areas within the continental United States is $319. This consists of $233 for lodging and $86 for meals and incidental expenses. For all other areas within the continental United States, the per diem rate is $225 for travel after September 30, 2025 ($151 for lodging and $74 for meals and incidental expenses). For travel during the last three months of 2025, employers must continue to use the same reimbursement method for an employee as they used during the first nine months of the calendar year. Also, note that per diem rates can’t be paid to individuals who own 10% or more of the business. Revisit reimbursement methods As the beginning of a new year approaches, it’s a good time to review how your business reimburses employees’ business travel expenses. Switching from an actual expense method to a per diem method in 2026 could save your business and your employees time and frustration. Contact us if you have questions about efficient and tax-compliant travel reimbursement methods. © 2025 

For many individuals, certain assets bypass their wills or trusts and are transferred directly to loved ones through beneficiary designations. These nonprobate assets may include IRAs and certain employer-sponsored retirement accounts, life insurance policies, and some bank and brokerage accounts. This means that if you aren’t careful with your beneficiary designations, some of your assets might not be distributed as you expected. Not only does this undermine your intentions, but it can also create unnecessary conflict and hardship among surviving family members. 3 steps Here are three steps to help ensure your beneficiary designations will align with your estate planning goals: 1. Name a primary beneficiary and a contingent beneficiary. Without a contingent beneficiary for an asset, if the primary beneficiary dies before you — and you don’t designate another beneficiary before you die — the asset will end up in your general estate and may not be distributed as you intended. In addition, certain assets are protected from your creditors, which wouldn’t apply if they were transferred to your estate. To ensure that you control the ultimate disposition of your wealth and protect that wealth from creditors, name both primary and contingent beneficiaries and don’t name your estate as a beneficiary. 2. Reconsider beneficiaries to reflect changing circumstances. Designating a beneficiary isn’t a “set it and forget it” activity. Failure to update beneficiary designations to reflect changing circumstances creates a risk that you’ll inadvertently leave assets to someone you didn’t intend to benefit, such as an ex-spouse.  It’s also important to update your designation if the primary beneficiary dies, especially if there’s no contingent beneficiary or if the contingent beneficiary is a minor. Suppose, for example, that you name your spouse as the primary beneficiary of a life insurance policy and name your minor child as the contingent beneficiary. If your spouse dies while your child is still a minor, it may be advisable to name a new primary beneficiary — such as a trust — to avoid the complications associated with leaving assets to a minor (court-appointed guardianship, etc.). Note that there are many nuances to consider when deciding to name a trust as a beneficiary. 3. Take government benefits into account. If a loved one depends on Medicaid or other government benefits — for example, a disabled child — naming that person as primary beneficiary of a retirement account or other asset may render him or her ineligible for those benefits. A better approach may be to establish a special needs trust for your loved one and name the trust as beneficiary. Avoiding unintentional outcomes Not paying proper attention to beneficiary designations can also expose your estate to costly delays and legal disputes. If a listed beneficiary is no longer living, or if a designation is vague or incomplete, an asset may have to go through probate, which defeats the purpose of naming beneficiaries in the first place. This can increase expenses, delay distributions and create stress for your family during an already difficult time. Carefully making beneficiary designations and regularly reviewing and updating them helps ensure your asset distributions align with your current wishes, helps prevent disputes, and helps protect your family from unintended financial complications. Contact us with questions regarding your estate plan. © 2025

Pricing is among the most powerful levers for business owners to calibrate their companies’ profitability. Set prices too low and you risk leaving money on the table. Set them too high and customers may pass you by for cheaper competitors. Your continuous objective should be to find that sweet spot where prices are competitive while supporting your profit margins and long-term growth. Trouble is, that sweet spot tends to move around a lot — so you must regularly reevaluate your pricing strategy. Crunching the numbers To get started, crunch some numbers. Use your financial statements to determine whether your current prices cover both direct costs (such as labor and materials) and indirect costs (such as overhead and administrative expenses). Monitoring costs is critical — especially given today’s economic volatility. Rising expenses related to suppliers, vendors or labor can quickly erode margins if prices remain static. Regularly reviewing the relationship between expenses and pricing helps ensure adjustments are proactive rather than reactive. Another useful step is calculating your breakeven point. This metric tells you how many units you must sell at a given price to cover all costs without incurring a loss. Sales beyond the breakeven point will generate a profit. It’s a good starting point for assessing whether current sales volumes align with your existing pricing strategy. Also, benchmark pricing in relation to your industry and market. Monitor what competitors are charging and compare their prices to yours. A major differential, whether higher or lower, could hurt sales and your business’s reputation if you can’t reasonably rationalize the difference. Listening to customers Negative customer behavior is another indication that your pricing strategy may be suboptimal. Are customers constantly pushing back on price, whether during the sales process or when interacting with customer service? If so, you might want to modulate prices slightly lower. On the other hand, if sales are flowing through the pipeline unusually fast, with little resistance, it could mean your prices are too low. Consider customer segmentation as well. This is a process by which you divide your customer base into smaller groups with common characteristics, allowing you to tailor pricing to each group. For example, some customers might be willing to pay a premium for faster service or customized solutions. Customer segmentation can provide cleaner, more useful data that fuels better decision-making. Adjusting cautiously If a thorough analysis reveals your profit margins are too thin, you may want to raise prices. But proceed with caution. Perhaps increase the price of one or two strong sellers and closely monitor the impact. If sales remain steady, you’re probably on the right track — remember, even a subtle price increase can boost profitability. Conversely, if sales suffer, you may need to rethink your pricing strategy. When raising prices, it’s imperative to communicate clearly with customers. Explain why you’re doing it in plain language, focusing on value. Highlight what makes your business different and better than the competition in areas such as quality, expertise and service. Customers are often willing to pay more provided they understand the value they’re getting for their money. Of course, there may also be instances when you choose to lower prices — perhaps for a limited time or even indefinitely. In such cases, customer communication is equally important. More than likely, you’ll want to “shout from the rooftops” that you’re lowering prices. Develop a marketing initiative that effectively communicates this message while covering the details. Getting some help In today’s roller coaster economy, a viable pricing strategy requires ongoing analysis. Regularly review your margins, assess the market, and align prices with your business’s strategic objectives and customer values. Interested in some objective guidance? We can help you analyze costs, apply the right metrics and optimize prices based on current market dynamics. © 2025 

Approximately 1.3 million Americans live in nursing homes, according to the National Center for Health Statistics. If you have a parent moving into one, taxes are probably not on your mind. But there may be tax implications. Here are five possible tax breaks. 1. Long-term medical care The costs of qualified long-term care, including nursing home care, are deductible as medical expenses to the extent they, along with other medical expenses, exceed 7.5% of adjusted gross income (AGI). Qualified long-term care services are necessary diagnostic, preventive, therapeutic, curing, treating, mitigating and rehabilitative services, and maintenance or personal-care services required by a chronically ill individual that are provided by a licensed healthcare practitioner. To qualify as chronically ill, a physician or other licensed healthcare practitioner must certify an individual as unable to perform at least two activities of daily living (eating, toileting, transferring, bathing, dressing and continence) for at least 90 days due to a loss of functional capacity or severe cognitive impairment. 2. Nursing home payments Amounts paid to a nursing home are deductible as medical expenses if a person is staying at the facility principally for medical, rather than custodial care. If a person isn’t in the nursing home principally to receive medical care, only the portion of the fee that’s allocable to actual medical care qualifies as a deductible expense. But if the individual is chronically ill, all qualified long-term care services, including maintenance or personal care services, are deductible. If your parent qualifies as your dependent, you can include any medical expenses you incur for your parent along with your own when determining your medical deduction. 3. Long-term care insurance Premiums paid for a qualified long-term care insurance contract are deductible as medical expenses (subject to limitations explained below) to the extent they, along with other medical expenses, exceed the percentage-of-AGI threshold. A qualified long-term care insurance contract covers only qualified long-term care services, doesn’t pay costs covered by Medicare, is guaranteed renewable and doesn’t have a cash surrender value. Qualified long-term care premiums are includible as medical expenses up to certain amounts. For individuals over 60 but not over 70 years old, the 2025 limit on deductible long-term care insurance premiums is $4,810, and for those over 70, the 2025 limit is $6,020. 4. The sale of your parent’s home If your parent sells his or her home, up to $250,000 of the gain from the sale may be tax-free. To qualify for the $250,000 exclusion ($500,000 if married), the seller must generally have owned and used the home for at least two years out of the five years before the sale. However, there’s an exception to the two-out-of-five-year use test if the seller becomes physically or mentally unable to care for him- or herself during the five-year period. 5. Head-of-household filing status If you aren’t married and your parent meets certain dependency tests, you may qualify for head-of-household filing status, which has a higher standard deduction and, in some cases, lower tax rates than single filing status. You might be eligible to file as head of household even if the parent for whom you claim an exemption doesn’t live with you. These are only some of the tax issues you may have to contend with when your parent moves into a nursing home. Contact us if you need more information or assistance. © 2025 

If you’re considering guaranteeing, or are asked to guarantee, a loan to your closely held corporation, it’s important to understand the potential tax consequences. Acting as a guarantor, endorser or indemnitor means that if the corporation defaults, you could be responsible for repaying the loan. Without planning ahead, you may face unexpected tax implications. A business bad debt If you’re compelled to make good on the obligation, the payment of principal or interest in discharge of the obligation generally results in a bad debt deduction. This may be either a business or a nonbusiness bad debt deduction. If it’s a business bad debt, it’s deductible against ordinary income. A business bad debt can be either totally or partly worthless. If it’s a nonbusiness bad debt, it’s deductible as a short-term capital loss, which is subject to certain limitations. A nonbusiness bad debt is deductible only if it’s totally worthless. To be treated as a business bad debt, the guarantee must be closely related to your trade or business. If the reason for guaranteeing the corporation loan is to protect your job, the guarantee is considered closely related to your trade or business as an employee. But employment must be the dominant motive. If your annual salary exceeds your investment in the corporation, this generally shows that the dominant motive for the guarantee is to protect your job. On the other hand, if your investment in the corporation substantially exceeds your annual salary, that’s evidence that the guarantee is primarily to protect your investment rather than your job. Proving the relationship Except in the case of job guarantees, it may be difficult to show the guarantee is closely related to your trade or business. You have to show that the guarantee is related to your business as a promoter, or that the guarantee is related to some other trade or business separately carried on by you. If the reason for guaranteeing your corporation’s loan isn’t closely related to your trade or business and you’re required to pay off the loan, you can take a nonbusiness bad debt deduction if you show that your reason for the guarantee was to protect your investment, or you entered the guarantee transaction with a profit motive. Note: The IRS and courts will scrutinize the dominant motive carefully. Reasonable compensation doesn’t always mean money. It can include protecting employment or business interests. Additional requirements In addition to satisfying the above requirements, a business or nonbusiness bad debt is deductible only if you meet these three conditions: You have a legal duty to make the guaranty payment (although there’s no requirement that a legal action be brought against you). The guaranty agreement is entered into before the debt becomes worthless. You receive reasonable consideration (not necessarily cash or property) for entering into the guaranty agreement. Any payment you make on a loan you guaranteed is deductible as a bad debt in the year you make it, unless the agreement (or local law) provides for a right of subrogation against the corporation. If you have this right, or some other right to demand payment from the corporation, you can’t take a bad debt deduction until the rights become partly or totally worthless. These are only some of the possible tax consequences of guaranteeing a loan to your closely held corporation. Consult with us to learn all the implications and to help ensure the best tax results. © 2025 

Life insurance is often a cornerstone of estate planning, providing liquidity to cover estate taxes, debts or other obligations. However, life insurance proceeds generally will be included in your taxable estate if you own the policy outright. So if your estate is (or in the future might be) large enough that estate taxes are a concern, you’ll want to consider strategies for shielding insurance proceeds. An irrevocable life insurance trust (ILIT) is one option. It removes the policy from your estate, ensuring that the death benefit passes to your beneficiaries free of estate tax. How it works To establish an ILIT, you create an irrevocable trust, transfer ownership of an existing life insurance policy to it and designate beneficiaries. Alternatively, you can set up an ILIT as the owner of a new policy you purchase. In addition, the ILIT must be funded so that it’s able to pay the premiums on the policy. The transfer of an existing policy to an ILIT is, however, considered a taxable gift. Further, subsequent transfers to the trust to fund premiums would also be treated as gifts. But the gifts can be sheltered from tax by your available gift and estate tax exemption. (You may even be able to add “Crummey” provisions to your ILIT that allow you to apply your gift tax annual exclusion to the transfers to the trust for funding premiums.) Gifts up to the annual exclusion amount — $19,000 for 2025 — are tax-free and thus don’t use up any of your lifetime exemption. Because the trust is irrevocable, you can’t change its terms once established. For example, you can’t change the beneficiaries. But this “loss of control” is what keeps the proceeds outside your taxable estate. You can, however, name another family member or a knowledgeable professional as the trustee. Typically, you’ll designate the ILIT as the primary beneficiary of the life insurance policy. On your death, the proceeds are deposited into the ILIT and held for distribution to the trust’s beneficiaries. In most cases, these will be your spouse, children, grandchildren or other family members. Potential pitfalls There are some pitfalls to watch for when transferring an insurance policy to an ILIT. For example, if you transfer an existing policy to the ILIT and die within three years of the transfer, the proceeds will be included in your taxable estate. But the three-year rule doesn’t apply if the ILIT purchased a new policy on your life. Another pitfall is naming your surviving spouse as the sole beneficiary. It may merely delay estate tax liability until your spouse dies (assuming he or she outlives you). Consider all your options An ILIT isn’t a one-size-fits-all solution. It’s generally most beneficial for high-net-worth individuals who anticipate significant estate tax exposure. The trust can provide heirs with tax-free liquidity precisely when it’s needed most, without forcing the sale of family assets or business interests to cover tax bills. But if estate tax liability isn’t a significant risk for you, the tax benefits of an ILIT may not outweigh the downsides of giving up control of the policy. We can help you determine whether an ILIT is appropriate for achieving your goals. © 2025