Estate Planning Strategies for CPAs in 2025
2025 brings in big news for estate planning, particularly relevant for CPA firm owners who may need to consider both personal assets and their practice’s value in their planning. Since 2018, we’ve enjoyed generous estate tax exemptions, and they were set to expire at the end of next year. However, with Trump’s reelection, it’s quite likely that those high exemption limits will be extended, and it’s possible that the estate tax could even be repealed. However, just as we shouldn’t be overconfident with our investments, we should also not assume any repealments on the horizon and instead focus on creating clear-cut estate plans that reduce lifetime taxable income and help preserve your legacy for generations to come. And with 2025 bringing even higher exemption limits than 2024, there are plenty of ways to reduce our estate in smart and savvy manners.
The Unified Credit System
Before diving into specific estate planning strategies, it’s essential to understand the Unified Credit System, which governs how much you can give away both annually and throughout your lifetime without incurring gift or estate taxes. The Unified Credit System has two distinct components:
Annual Gift Exemption
You can give up to $19,000 (2025) per person per year tax-free, up from $18,000 in 2024. This is a separate allowance that renews every year and doesn’t count against your lifetime amount. Like the lifetime exemption, this amount is periodically adjusted for inflation.
Lifetime Gift & Estate Tax Exemption
This is the combined limit that applies to:
- Gifts above the annual exemption made during your lifetime
- Your estate value at death.
In 2025, the lifetime annual limit will increase to $13.99 million, up from $13.61 million in 2024. So if you give someone $25,000 in 2025, $19,000 is covered by the annual exemption. The extra $6,000 counts against your $13.99 million lifetime exemption.
For CPA firm owners, understanding these limits is particularly important as your practice’s value counts toward your total estate value, potentially pushing you closer to the lifetime limit than you might realize. This brings us to the crux of estate planning: choosing whether to execute tactical strategies now for an immediate benefit or utilizing strategies that can enable your assets to grow tax-free, helping to preserve your estate for future generations, of which there are plenty.
Short-Term Strategies
Cash Gifts
Annual gifts can quickly reduce your taxable estate, especially when you have multiple family members as beneficiaries. Consider this scenario: if you’re married with two children, and each child has two kids of their own, you have six potential beneficiaries. At the current annual gift exclusion of $19,000 per recipient, you could transfer up to $114,000 ($19,000 × 6) from your estate in 2025 without touching your lifetime exemption. If your spouse joins in gift-splitting, that amount doubles to $228,000 in 2025. Over just five years, this strategy could move over $1.1 million out of your taxable estate while providing immediate financial support to your family members.
Direct Payments
Not every transfer you make counts as a gift: direct payments to medical providers for healthcare expenses or directly to educational institutions for tuition are tax-free and don’t count against your annual or lifetime gift tax exclusions.
Charitable Giving
Unlike gifts to family members, charitable donations don’t impact your annual gift exclusion or lifetime exemption. Each charitable gift reduces your taxable estate dollar-for-dollar while also providing income tax deductions—up to 60% of AGI for cash donations or 30-50% for appreciated assets like securities or real estate.
Long-Term Strategies
While direct gifts, direct payments, and charitable contributions immediately and permanently reduce your taxable estate, they miss an opportunity for tax-advantaged growth since the money is immediately in the beneficiary’s control. Trusts, on the other hand, are better suited for long-term gifting strategies since they remain out of control of the beneficiary, though they still benefit from it.
Trust Strategies
Think of trusts as protective containers for your assets that offer more control than outright gifts. With irrevocable trusts, assets move outside your estate and are managed according to your predetermined terms. Beyond tax benefits, these structures offer asset protection and help avoid probate while maintaining privacy. Several trust types might fit your needs—from Spousal Lifetime Access Trusts (SLATs) to Intentionally Defective Grantor Trusts (IDGTs). Let’s look at one possible trust strategy: the Charitable Remainder Trust (CRT).
Imagine you have $2 million in appreciated stock with a $500,000 basis that you’d like to sell and split between charity and family. Selling directly triggers a $300,000 capital gains tax (20% of $1.5 million gain), leaving you with $1.7 million. Instead, by contributing the full $2 million to a CRT, here’s what could happen: The trust pays 5% of its value annually to charity while growing at, let’s say, 7%. After 20 years, the charity has received $2.51 million in distributions, and your heirs get $2.78 million—substantially more than if you had sold and split the proceeds directly. Keep in mind that that growth rate is an assumption, and there’s the risk that your heir will be left with significantly less, if anything.
Cash Gifts with Crummey Powers
When reducing your estate, you typically have to choose between:
Immediate impact: cash gifts, direct payments, or charitable contributions.
Long-term impact: trusts that grow assets over time. However, there’s a clever way to get both benefits using Crummey powers. The IRS requires gifts to be of “present interest” (meaning immediate access) to qualify for the annual gift exemption. Crummey powers solve this by giving beneficiaries a temporary withdrawal right while still preserving long-term trust benefits.
Here’s how it works: When you contribute to the trust (say, $19,000 each for your three children), each beneficiary gets a short 30-60-day window to withdraw their portion. This temporary access right satisfies the IRS’s “present interest” requirement, allowing these contributions to qualify for the annual gift exemption. Once this withdrawal window closes, the assets remain in trust to be professionally managed and invested for long-term growth. While formal withdrawal notices must be sent for each contribution, families typically understand these funds are meant for long-term growth outside your taxable estate. However, the trust documents cannot explicitly state or imply any agreement not to withdraw, as this would invalidate the “present interest” nature of the gift.
529 College Savings Plans
Like Crummey powers, 529 College Savings Plans offer another strategic way to make gifts while maintaining control over the assets. While direct gifts require immediate access by the beneficiary (the “present interest” requirement we discussed earlier), 529 plans sidestep this rule through their unique structure: contributions qualify for the annual gift exemption even though you, as the account owner, maintain control over the funds. This means you can transfer up to $19,000 annually per beneficiary out of your estate while ensuring the money is used as intended – for educational expenses. The funds grow tax-free, and distributions are also tax-free when used for qualified education costs. Even better, you can front-load five years of contributions at once, a powerful estate reduction strategy not available with regular gifts or Crummey trusts. The key advantage here is control. Unlike outright gifts or even Crummey trusts (where beneficiaries have a real, if temporary, right to withdraw), with a 529 plan, you maintain complete authority over the funds. You can change beneficiaries, control the timing of distributions, or even withdraw the money (though non-qualified withdrawals face taxes and penalties).
In Conclusion
For CPA firm owners, these estate planning strategies represent just a fraction of what’s available. Your specific situation—whether it involves practice transition plans, real estate holdings, or investment portfolios—will determine which strategies make the most sense. While the estate tax exemptions will likely stay favorable with recent political developments, that shouldn’t make us complacent. If you’d like to explore how current exemption limits could benefit your family and protect your practice’s value, click below to set up a conversation. We’ll examine your whole financial picture and explore options that align with your personal, financial, and legacy goals.
