If you’re charitably inclined, your estate plan can benefit from a donor-advised fund

Whether it’s a trademark, copyright, patent, trade secret or other piece of IP, its ultimate value to your business depends on you owning it. Without airtight agreements with employees and independent contractors, these workers may claim that the IP they research and develop belongs to them. Some companies learn they don’t actually own IP assets only when they’ve engaged a business valuation professional in preparation for a sale, or when employees leave and take IP with them. To prevent unexpected ownership issues and costly disputes that could create risk and diminish your business’s value, take action now. What the law says Federal copyright law and the laws of most states mandate that employees and independent contractors who invent products, write materials and develop software may be the owners of the IP rights. In fact, in some states, employers may only have a limited license to inventions created by employees, even if they were invented “on the clock” or using company resources. Fortunately, you can help prevent ownership disputes, including litigation. All states permit businesses to require workers to sign copyright, IP and invention assignment agreements, subject to applicable legal limitations. Work with an attorney who specializes in IP to draft a standard agreement based on your state’s laws. It should require the employee or contractor to turn over or legally “assign” IP rights to your business. In addition, it should mandate that the employee or contractor assist your company’s legal counsel in securing and enforcing these rights. It’s also important to apply these agreements consistently and enforce them in practice, because inconsistent use can weaken your position in disputes and merger and acquisition due diligence. Go a step further When you hire workers (or when you require them to sign an agreement), make sure you ask them to identify all pre-existing inventions that are to be excluded from the agreement. For example, they may have patented inventions on their own or created trademarks for previous employers. Then request that they give up claims to any new inventions that are related to your business activities, even if the inventions are developed during their nonworking hours. For example, let’s say your company develops 3D printing software. Your agreement should prohibit your code writers from creating related design tools at home and then selling them to your competitors. If, however, an employee working on her own time and with her own resources develops software that’s unrelated to your business, that IP likely belongs to her. Some states, such as California, prevent employers from claiming such IP or asking employees to sign away their rights to it. Legal and financial advice Ultimately, safeguarding IP isn’t a passive exercise but a deliberate business discipline that requires foresight, structure and legal precision. Although an attorney’s guidance is critical for this purpose, financial advisors also play an important role. We can help you address IP ownership issues before you sell your business or before workers leave your employment. We can also help identify financial and tax considerations of IP. Contact us for more information. © 2026 

Yes, the April 15 tax deadline is now behind us. But there are also deadlines during the rest of the year that are important to be aware of. To help you not miss any, here’s when some key tax-related forms, payments and other actions are due. Keep in mind that this list isn’t all-inclusive. There may be additional deadlines that apply to you. Please review the calendar and let us know if you have any questions about the deadlines or would like assistance in meeting them. June 15 File a 2025 individual income tax return (Form 1040 or Form 1040-SR) or file for a four-month extension (Form 4868) if you live outside the United States and Puerto Rico or you serve in the military outside those two locations. Pay any tax, interest and penalties due. Pay the second installment of 2026 estimated taxes (Form 1040-ES) if not paying income tax through withholding or not paying sufficient income tax through withholding. September 15 Pay the third installment of 2026 estimated taxes (Form 1040-ES) if not paying income tax through withholding or not paying sufficient income tax through withholding. September 30 If you’re the trustee of a trust or the executor of an estate, file an income tax return for the 2025 calendar year (Form 1041) if an automatic five-and-a-half-month extension was filed. Pay any tax, interest and penalties due. October 15 File a 2025 individual income tax return (Form 1040 or Form 1040-SR) if an automatic six-month extension was filed (or if an automatic four-month extension was filed by a taxpayer living outside the United States and Puerto Rico or serving in the military outside those two locations). Pay any tax, interest and penalties due. Make contributions for 2025 to certain retirement plans or establish a SEP for 2025 if an automatic six-month extension was filed. File a 2025 gift tax return (Form 709) if an automatic six-month extension was filed. Pay any tax, interest and penalties due. December 31 Make 2026 contributions to certain employer-sponsored retirement plans. Make 2026 annual exclusion gifts (up to $19,000 per recipient). Incur various expenses that potentially can be claimed as itemized deductions on your 2026 tax return. Examples include charitable donations, medical expenses and property tax payments. © 2026 

The passive activity loss (PAL) rules may limit your ability to deduct losses from a business structured as a limited liability partnership (LLP) or limited liability company (LLC). Depending on how your ownership interest is treated under these rules, you may have more or less flexibility to claim losses in the current year. Here’s a closer look. The basics Under the PAL rules, you generally can use passive activity losses only to offset income from other passive activities. (Keep in mind that other limitations, such as basis and at-risk rules, may apply before the PAL rules.) There are two types of passive activities: 1) trade or business activities in which you don’t materially participate during the year, and 2) rental activities, even if you do materially participate (unless you qualify as a real estate professional under the PAL rules). Disallowed losses may be carried forward to future years and deducted from passive income or recovered when the passive business interest is sold. If you’re an LLP or LLC owner, you can avoid passive treatment by materially participating in the business’s activities. This allows you to use LLP or LLC losses to offset nonpassive income, such as wages, interest, dividends and capital gains. 7 factors Material participation in this context means participation on a “regular, continuous and substantial” basis. Unless you’re treated as a limited partner, you’re deemed to materially participate in a business activity during the year by meeting one of the following seven criteria: You participate in the activity more than 500 hours during the year. Your participation constitutes substantially all the participation for the year by anyone, including nonowners. You participate more than 100 hours and as much or more than any other person. The activity is a “significant participation activity” — that is, you participate more than 100 hours — but you participate less than one or more other people yet your participation in all your significant participation activities for the year totals more than 500 hours. You materially participated in the activity for any five of the preceding 10 tax years. The activity is a personal service activity in which you materially participated in any three previous tax years. Regardless of the number of hours, based on all the facts and circumstances, you participate in the activity on a regular, continuous and substantial basis. Limited partners face more restrictive rules; they can establish material participation only by satisfying criterion 1, 5 or 6. Supporting your deductions If you’re an LLC or LLP owner, it’s important to track the time you spend on business activities. In addition, if your spouse also participates in an activity, you can combine your hours to meet the material participation standards. Contact us for additional guidance on documenting your hours, applying the material participation test and maximizing business loss deductions. © 2026 

With the April 15 tax filing deadline in the rearview mirror, you’re likely to turn your attention to other things. But before you do, it’s in your best interest to tie up a few tax-related loose ends. IRS statute of limitations Generally, the IRS’s statute of limitations for auditing a tax return is three years from the return’s due date or the filing date, whichever is later. However, some tax issues are still subject to scrutiny after three years. For example, if the IRS suspects that income has been understated by 25% or more, the statute of limitations for an audit extends to six years. If no return was filed or fraud is suspected, there’s no limit on when the IRS can launch an inquiry. It’s a good idea to keep copies of your tax returns indefinitely as proof of filing. Supporting records generally should be kept until the three-year statute of limitations expires. These documents may also be helpful if you need to amend a return. So, which records can you throw away now? Based on the three-year rule, in late April 2026, you’ll generally be able to discard most records associated with your 2022 return if you filed it by the April 2023 due date. Extended 2022 returns could still be vulnerable to audit until October 2026. But if you want extra protection, keep supporting records for six years. What records should you retain? Documentation supporting your income, deductions and credits that you generally should retain following the three-year rule may include: Various series 1099 forms, such as Form 1099-NEC, “Nonemployee Compensation,” Form 1099-MISC, “Miscellaneous Income,” and Form 1099-G, “Certain Government Payments,” Form 1098, “Mortgage Interest Statement,” Property tax payment documentation, Charitable donation substantiation, Records related to contributions to and withdrawals from Section 529 plans and Health Savings Accounts, and Records related to deductible retirement plan contributions. You’ll also want to hang on to some tax-related records beyond the statute of limitations. For example: Retain Forms W-2, “Wage and Tax Statement,” until you begin receiving Social Security benefits. That may seem long, but if questions arise regarding your work record or earnings for a particular year, you’ll need your W-2 forms as part of the required documentation. Keep records related to investments and real estate for as long as you own the assets, plus at least three years after you sell them and report the sales on your tax return (or six years if you want extra protection). Hang on to records associated with retirement accounts until you’ve depleted the accounts and reported the last withdrawal on your tax return, plus three (or six) years. Retain records that support figures affecting multiple years, such as carryovers of charitable deductions or casualty losses, until they have no effect, plus seven years. Keep records that support deductions for bad debts or worthless securities that could result in refunds for seven years because you have up to seven years to claim them. Other tax-related chores As you can see, keeping tax-related records is critical. So put yourself in a good position for filing your 2026 return next year by carefully tracking expenses potentially eligible for deductions or credits on an ongoing basis. For example, if you’re self-employed and use your personal vehicle for business purposes, maintain a mileage log recording the date, mileage, purpose and destination of each trip. Or if you regularly donate to charity, keep the receipts or written acknowledgments you receive. (Additional substantiation may be required depending on the size and type of donation.) In addition, this is a good time to reassess your current tax withholding to determine if you need to update your Form W-4, “Employee’s Withholding Certificate.” You may want to increase withholding if you owed taxes this year. Conversely, you might want to reduce it if you received a hefty refund. Changes also might be in order if you experience certain major life events, such as marriage, divorce, birth of a child or adoption, this year. If you make estimated tax payments throughout the year, consider reevaluating the amounts you pay. You might want to increase or reduce the payments due to changes in self-employment income, investment income, Social Security benefits and other types of nonwage income. To preempt the risk of a penalty for underpayment of tax, consider paying at least 100% of the tax shown on your 2025 tax return (110% if your 2025 adjusted gross income was over $150,000 — or over $75,000 if you’re married and filed separately) through withholding and/or four equal estimated tax payments. What’s this? A letter from the IRS? After filing your tax return, you may receive a letter in the mail from the IRS. While such letters can be alarming, don’t assume the worst. The letter might simply inform you of a refund adjustment (up or down) based on a math or similar error on your return. If you agree with the change, generally no response is needed. If you disagree, contact the IRS by the date indicated. Or the letter might propose a change to your return based on information reported by third parties, such as employers or financial institutions. In this case, follow the instructions to respond, include any required documentation, and note whether you agree or disagree with the proposed change. Of course, an IRS letter could inform you that your return is being audited. It’s important to remember that being selected for an audit doesn’t always mean there’s a significant error on your return. For example, your return could have been flagged based on a statistical formula that compares similar returns for deviations from “norms.” Further, if selected, you’re most likely going to undergo a correspondence audit. These account for a majority of IRS audits. They’re conducted by mail for a single tax year and involve only a few issues that the IRS anticipates it can resolve by reviewing relevant documents. According to the IRS, most audits involve returns filed within the last two years. If you receive notification of a correspondence audit, you and your tax advisor should closely follow the instructions. You can request additional time if you can’t submit all the documentation requested by the specified deadline. Don’t ignore the letter. Failure to respond can lead to the IRS disallowing some tax breaks you claimed and issuing a Notice of Deficiency (that is, a notice that a tax balance is due). Be proactive Organizing your past and current-year tax records now can facilitate a smoother tax filing next year or a less painful audit of a recent return. Similarly, adjusting your withholding or estimated tax payments can mean more money in your pocket now or no (or smaller) underpayment penalties next April. If you have questions on what files to keep and for how long or how to adjust withholding or estimated tax payments, we can help. And if you receive an IRS letter, contact us as soon as possible. We can advise you on complying with any IRS requests. © 2026 

In today’s digital world, estate planning goes beyond physical property and financial accounts — it must also address your digital assets. From online banking and investment accounts to social media profiles, cloud storage and even cryptocurrency, these assets can hold both financial and sentimental value. Without proper planning, your loved ones may face significant legal and logistical challenges in accessing or managing them. By taking steps now to inventory your digital assets and incorporate them into your estate plan, you can help ensure a smoother transition and protect your legacy in the digital age. What digital assets do you possess? The first step in planning for digital assets is to identify all online accounts and digital property you own. Financial accounts, such as online bank and brokerage accounts, should be listed alongside nonfinancial assets like email accounts, social media profiles, subscription services and cloud storage. Don’t forget emerging asset classes such as cryptocurrencies or monetized digital content. For each asset, detail how to access it, including usernames, passwords and any multi-factor authentication methods. This sensitive information should be stored in a secure location, such as a password manager or encrypted document, rather than directly in your will. How do you want the assets to be handled? You may want certain accounts memorialized, deactivated or deleted altogether. Many platforms, including Facebook and Google, allow users to designate legacy contacts or set instructions for account management after death. Taking advantage of these tools can simplify the process for your loved ones. Also consider designating a family member or friend to manage your digital assets. You can give this person, sometimes referred to as a “digital executor,” the authority through your will or a separate legal document, depending on your state’s laws. His or her role is to carry out your instructions, access accounts and ensure that digital property is handled appropriately. Be sure to discuss your wishes with this individual in advance so he or she understands the responsibilities. Any legal considerations? Laws governing access to digital assets vary by state, and service providers often have their own policies that limit what can be shared. Fortunately, there are laws that govern access to digital assets in the event of your death or incapacity. Most states have adopted the Revised Uniform Fiduciary Access to Digital Assets Act (RUFADAA), which provides a three-tier framework for accessing and managing your digital assets: The act gives priority to providers’ online tools for managing the accounts of customers who die or become incapacitated. For example, Google offers an “inactive account manager,” which allows you to designate someone to access and manage your account. Similarly, Facebook allows users to determine whether their accounts will be deleted or memorialized when they die and to designate a “legacy contact” to maintain their memorial pages. If the online provider doesn’t offer such tools, or if you don’t use them, access to digital assets is governed by provisions in your will, trust, power of attorney or other estate planning document. If you don’t grant authority to your representatives in your estate plan, then access to digital assets is governed by the provider’s Terms of Service Agreement. To ensure that your loved ones have access to your digital assets, use providers’ online tools or include explicit authority in your estate plan. More questions? By taking a proactive approach to digital asset planning, you can reduce uncertainty, avoid unnecessary complications and provide clear guidance for your loved ones. A well-structured plan can protect the financial value of your digital property and help ensure that your personal legacy is handled according to your wishes. We can answer your questions on properly addressing digital assets in your estate plan. Contact us today to learn more. © 2026 

So you’ve decided to start your own business — congratulations! Many new owners open a business to be their own boss and chart their own course. However, along with those benefits come some complications compared to being someone else’s employee. Planning and budgeting are critical, and you’ll have plenty of new tax compliance responsibilities. 1. It starts with funding Starting a business takes money. To help you gain access to bank loans and attract equity investors, write a formal business plan that tells your backstory, describes your products and services, and highlights your market research. The plan should explain how you intend to use any capital you raise to grow the business and, of course, why your business will be successful. Because your new business won’t have a financial track record, you’ll need to create a projected balance sheet, income statement and statement of cash flows using market-based assumptions. Lay out multiple scenarios — including best, worst and most likely results — and identify which variables are critical. 2. Accounting matters When you set up your business, separate its finances from your personal finances. Commingled financial records can cause tax and financial reporting headaches as your business grows. Next, understand that lenders and investors will want to know whether your business is meeting performance targets. Establish an accounting system to record transactions and generate financial statements that can easily communicate results to stakeholders. We can recommend cost-effective software solutions. Initially, you may elect to use the cash-basis or income-tax-basis method of accounting to simplify matters. Indeed, it’s often easier for start-ups to maintain one set of books for both tax and accounting purposes. However, if you have an accounting background, you may opt for accrual-basis accounting from the get-go. 3. Tax planning is a must-do Many start-up ventures aren’t initially profitable. But it’s essential to start planning for taxes from the beginning. One factor that will affect your company’s tax situation is its entity structure. Depending on your tax, legal and other needs, you might choose a sole proprietorship, partnership, limited liability company (LLC), S corporation or C corporation. Know that C corporations pay tax at the entity level, then the individual owners pay tax when they receive dividends. This results in double taxation. To avoid this, you may want to consider a “pass-through” entity. Pass-through income generally isn’t taxed at the entity level. Instead, it passes through to the individual owners (along with the business’s deductible expenses) and is taxed on their individual returns. However, the top rates for individual taxpayers are higher than the flat 21% rate for C corporations — though the qualified business income deduction for pass-through entity owners can help make up for that. Another major tax issue to understand is the appropriate tax treatment for your start-up expenses. The timing and amount of expenses are key to determining what’s immediately deductible and what costs must be capitalized and amortized over time. New businesses need to plan for other taxes, too. You may need systems in place to file and pay property, sales and employment taxes. Look into initially outsourcing these administrative tasks to third-party specialists so you’ll have time to focus on daily business operations. 4. Estate planning now can save tax later Another smart consideration if you’re starting a business is estate planning. New entrepreneurs often solicit help from friends and family members. In exchange, founders may make gifts of ownership interests while the business’s fair market value is relatively low, removing potential future appreciation from their estates. A business valuation professional can help determine the fair market value of your new business based on objective market data and financial projections. Proactive estate planning at this phase can save significant tax dollars over the long run as the company’s value grows. 5. Employees may want equity Most start-ups operate lean, with only a few employees — each wearing multiple hats. Early employees may agree to forgo high salaries for equity-based compensation, which can help your start-up avoid a cash crisis while still attracting top talent. What’s in it for staffers? Business equity can grow into a valuable financial asset. Plus, employees who own equity may feel more invested and, thus, enjoy greater fulfillment. There are several types of equity-based compensation to consider, including outright transfers of ownership interests in the business, profits interest awards (partnerships, LLCs and S corporations) and restricted stock or stock options (C corporations). We can help you determine the best form of compensation. Thoughtful execution Launching a successful business requires more than vision alone. It also calls for thoughtful execution, informed decision-making and ongoing attention to financial and operational details. Approach start-up matters with strategic foresight by consulting legal, financial and tax advisors. We can help you get off the ground. © 2026 

After you’ve filed your 2025 tax return, what’s next? It’s easy to move on to other things, but taking a little time to address some tax-related items now can help you stay organized and avoid issues later. Here are a few to-dos. Check your refund status If you’re getting a tax refund and haven’t received it yet, the IRS offers a couple of ways to check the status. Begin by visiting irs.gov and going to “Where’s my refund?” If you’ve already set up an IRS account, you can sign in to check your refund. You also can request email notifications for status updates. Alternatively, you can use the refund tracker. You’ll need your Social Security number or Individual Taxpayer Identification Number, filing status, and the exact refund amount on your return. File an amended return if needed Let’s say you find receipts for some deductible 2025 expenses you didn’t report on your return. You can file an amended return to claim those deductions and potentially increase your refund. But there’s more to consider than just reporting the additional deductions. The change could affect other aspects of your return as well as your state return, if applicable. We can review the impact and assist you with properly filing an amended return. In general, you can file an amended tax return on Form 1040-X and claim a refund within three years of the date you filed your original return or within two years of the date you paid the tax, whichever is later. So for a 2025 tax return that you file on April 15, 2026, your deadline for filing an amended return to claim a refund generally will be April 15, 2029. However, in certain situations you’ll have more time to file an amended return. For example, the statute of limitations for bad debt deductions is longer than the usual three-year time limit for most items on your tax return. In general, you can amend your tax return to claim a bad debt for seven years from the due date of the tax return for the year that the debt became worthless. Tidy up your tax records After you’ve filed your 2025 return, be sure to store your return and all supporting documents in a secure place where you’ll easily be able to find them in the future if needed. Now is also a good time to tidy up previous years’ records. Although retaining the appropriate tax records is important, you don’t have to keep everything forever. You should hold on to records related to your filing for as long as the IRS can audit your return or assess additional taxes. The statute of limitations is generally three years after you file your return. So you potentially can dispose of records related to your 2022 income tax return if you filed it by the April 2023 deadline. (Be aware that the statute of limitations extends to six years for taxpayers who understate their gross income by more than 25%.) However, you should keep certain tax-related records longer. For example, keep copies of your tax returns and other proof of filing indefinitely to document that you filed. (There’s no statute of limitations for an audit if you didn’t file a return or you filed a fraudulent one.) Retain records related to real estate or investments for as long as you own the asset, plus at least three years after you sell it and report the sale on your tax return. Similarly, keep records associated with a retirement account until you’ve depleted the account and reported the last withdrawal on your tax return, plus three years. Turn your tax focus to 2026 planning Once you’ve received your 2025 refund or filed an amended return (if applicable) and organized your tax records, it’s time to focus on 2026 planning. You can potentially maximize tax savings and minimize last-minute scrambling by planning now, rather than waiting until year end. We can help project your income, deductions and credits for the year and propose strategies you can implement in the coming months to reduce your taxes. Contact us to get started. © 2026 

Many small businesses don’t have enough employees to worry about the play-or-pay provisions of the Affordable Care Act (ACA). However, as your business grows, these rules can apply sooner than expected. This issue also may not be on your radar because there’s a common misconception that the repeal of ACA penalties under the Tax Cuts and Jobs Act applied to both individuals and businesses. While the individual mandate penalty was eliminated beginning in 2019, the employer shared responsibility rules are still in effect. Don’t let ACA compliance become a blind spot for your business. Here’s what you need to know to comply with the law’s requirements. The play-or-pay threshold The ACA’s employer shared responsibility rules apply to applicable large employers (ALEs). In general, ALEs are businesses with 50 or more full-time employees, including full-time equivalents (FTEs). Once a business crosses that threshold, it must comply with several requirements related to employee health coverage. An employer’s size for the year is determined by the number of full-time employees plus FTEs in its prior year. The challenge is that many business owners don’t realize they’re approaching the ALE threshold until it’s too late. First, for ACA purposes, a full-time employee generally is an individual employed on average at least 30 hours of service per week or 130 hours per month. So some employees you might consider to be part-time because they work less than 40 hours a week may be considered full-time for ACA purposes. Second, FTEs are determined by adding all hours of service for the month for employees who weren’t full-time employees (but no more than 120 hours per employee), and dividing by 120. This can push a company into ALE status faster than expected. For example, a small company with 35 full-time employees and a significant number of part-time workers could exceed the 50-full-time-employee threshold once part-time hours are aggregated. 2 types of penalties Under the ACA, an ALE may incur a penalty if it doesn’t offer minimum essential coverage to its full-time employees and their eligible dependents or if it offers such coverage, but that coverage isn’t affordable and/or fails to provide minimum value. The penalty is typically triggered when at least one full-time employee receives a premium tax credit for buying individual coverage through a Health Insurance Marketplace. One of two penalty structures may apply, depending on the circumstances. First, under Section 4980H(a), a penalty may be assessed if an ALE fails to offer coverage to at least 95% of its full-time employees and their dependents. This penalty is calculated based on the total number of full-time employees, excluding the first 30. Second, under Section 4980H(b), a penalty may apply for each full-time employee who receives a premium tax credit for purchasing coverage through a Health Insurance Marketplace because the employer’s coverage is unaffordable or doesn’t provide minimum value. Updated penalties for 2026 The adjusted penalty amounts (per the applicable number of full-time employees used to calculate the specific penalty) for failures occurring in the 2026 calendar year are: $3,340 (up from $2,900 in 2025) under Sec. 4980H(a), for ALEs not offering health coverage, and $5,010 (up from $4,350 in 2025) under Sec. 4980H(b), for ALEs offering coverage but that have employees who qualify for premium tax credits or cost-sharing reductions. The IRS uses Letter 226-J to inform ALEs of their potential liability for an employer shared responsibility penalty. A response form — Form 14764, “ESRP Response” — is included with Letter 226-J so that an ALE can inform the IRS whether it agrees with the proposed penalty. A response is generally due within 30 days. Be on the lookout for this letter so that you’re prepared to promptly review and respond if the IRS contacts you. Considerations for growing businesses As your workforce expands, it’s important to address the following questions: How close is your company to the 50-full-time-employee threshold? Are you properly identifying who’s a full-time employee under the ACA and calculating your number of FTEs based on part-timers’ hours? If your company becomes an ALE, how will it structure health coverage to satisfy affordability and minimum value requirements? Are your payroll and human resource systems prepared to support ACA reporting requirements, including Forms 1094-C and 1095-C? Addressing these issues early can help ensure that expansion plans don’t come with unexpected ACA penalties. For more information Careful compliance with the ACA remains critical for companies that qualify as ALEs. Growing small businesses should be particularly wary as they become midsize ones. Contact us with questions about your obligations and ways to better manage the costs of health care benefits. © 2026

Would you like your estate plan to support your favorite charity and leave a legacy for your family? Two trust types can be used together to help achieve those goals (one familiar and another you may not have heard of): a charitable remainder trust (CRT) and a wealth replacement trust (WRT). Let’s take a closer look at how each trust complements the other. The CRT’s role The CRT-WRT strategy begins with the CRT. You contribute securities or other assets to the CRT. Then the CRT pays you an income stream for life — a fixed percentage of the trust’s value. At the end of the trust’s term, the remaining assets are distributed to the charitable beneficiaries you named. In addition to receiving periodic income payments, you can claim a charitable income tax deduction equal to the present value of the charitable beneficiaries’ remainder interests. Even greater income tax savings may be available if you contribute appreciated property that would otherwise be subject to capital gains tax if sold. As a tax-exempt entity, the CRT can sell capital assets tax-free and reinvest the proceeds in income-producing assets (but you may be subject to income tax on a portion of the distributions you receive). So where does the WRT come in? As the CRT’s income beneficiary, you use the regular income stream you receive to fund the WRT. The WRT then purchases a life insurance policy that will ultimately benefit the WRT beneficiaries you name. When you die, the CRT’s assets pass to the charity you’ve selected. At the same time, the life insurance proceeds are paid to your WRT, which distributes them to your WRT beneficiaries based on the trust terms you established. The WRT’s role It’s possible to replace wealth with a stand-alone life insurance policy. However, setting up a WRT to hold your policy can offer benefits. For one thing, if you own the policy under your name, the proceeds will be included in your taxable estate. If your estate is large enough that estate taxes are a concern, this may reduce the policy’s wealth replacement power. By contrast, if your policy is owned by a properly structured WRT, the death benefit bypasses your estate (though contributions to the trust to cover premium payments generally will use up some of your lifetime gift tax exemption). Also, using a WRT allows you to place conditions on distributions to your beneficiaries. For example, you might not want them to receive all the proceeds right away. Note that it’s possible to transfer an existing life insurance policy to a WRT, but it can be risky. So unless you’re uninsurable, you’re probably better off making cash gifts to a WRT to buy a new policy. An example To get a better idea of how this strategy works, consider this example: Ken wants to donate $1 million to his alma mater, but he’s reluctant to deprive his children of the funds. Ken’s solution: He contributes $1 million to a CRT for the college’s benefit, which invests the money in conservative income-producing investments. He also establishes a WRT, naming his children as beneficiaries. He makes cash gifts each year to the trust financed in large part by income from his CRT. The WRT’s trustee uses these gifts to purchase a $1 million insurance policy on Ken’s life. When he dies, the CRT distributes its assets to the college, and the insurance company pays the death benefit to the WRT. This money, which replaces the charitable donation, can then be used by the trustee to benefit Ken’s children. Right strategy for you? If you’re charitably inclined but don’t want to deprive your family of its inheritance, the combination of a CRT and WRT may be the answer. Contact us if you’re interested in this strategy. We can review your overall estate plan to determine if a CRT and a WRT will help you achieve your goals. © 2026