Enhanced Estate and Gift Tax Benefits for Alight Employees in 2024

Healthcare Provider Update: Alight Solutions is partnered with various healthcare providers to support its employee benefits initiatives, with national insurers such as UnitedHealthcare and Cigna frequently featured in their offerings. Alight focuses on delivering customized health plans that cater to the diverse needs of its workforce while emphasizing cost-efficiency and quality of care. As we look ahead to 2026, Alight employees should brace for notable increases in healthcare costs. With projections indicating premiums for Affordable Care Act (ACA) plans could surge by as much as 66% in some states, the impact will be significant. Additionally, the anticipated expiration of enhanced federal subsidies could exacerbate out-of-pocket expenses, with many households potentially facing a chilling 75% rise in monthly premiums. Amidst this landscape, it is crucial for employees to carefully review benefit changes and explore strategies to manage increasing healthcare expenses effectively. Click here to learn more

As we transition into 2024, the landscape of federal gift, estate, and generation-skipping transfer (GST) tax laws has shifted significantly due to major inflation adjustments. For Alight employees focusing on their financial strategies, these changes present valuable opportunities for enhancing intergenerational wealth transfer and achieving greater tax efficiency.

The Internal Revenue Service (IRS) has raised the lifetime exemption levels for the federal estate tax and the GST tax considerably. Individual exemptions have grown from $12.92 million in 2023 to $13.61 million, a $690,000 increase. Similarly, for married couples, the exemption has surged from $25.84 million to $27.22 million. These adjustments facilitate significant wealth transfers to heirs or direct gifts to grandchildren (via GSTs) without incurring federal estate or GST taxes.

The aligned increase in both the estate tax exemption and the generation-skipping tax exemption allows for direct asset transfers to grandchildren or into trusts for their benefit, helping families circumvent the double taxation of estate taxes on subsequent generations.

However, these augmented exemption amounts are set to expire on December 31, 2025, unless new legislation extends them. Initially quadrupled by the Tax Cuts and Jobs Act of 2017, these exemptions will nearly halve if not renewed. This impending reduction underscores the importance of proactive estate and gift planning soon.

For 2024, the federal gift tax annual exclusion has also seen a roughly 6% increase to $18,000 per recipient, up from $17,000 the previous year. This enables Alight employees to devise strategic gifting plans that preserve estate value and promote wealth transfer between generations.

With the 2025 sunset date approaching, maximizing these increased exemptions is crucial to save on taxes. Consider utilizing the annual gift tax exclusion, which allows up to $18,000 per recipient in 2024 without impacting your lifetime estate or gift tax exemptions. Additionally, direct payments to medical providers for healthcare or educational institutions for tuition are exempt from gift taxes.

Including a gift tax return (IRS Form 709) is essential for contributions exceeding the annual exclusion, as part of comprehensive estate planning.

Alight employees should also explore trust-based strategies like lifetime irrevocable trusts, which remove assets from the taxable estate, and Grantor Retained Annuity Trusts (GRATs), where the grantor receives annuity payments for a set period before the remainder passes to beneficiaries, potentially tax-free.

Spousal Lifetime Access Trusts (SLATs) are another option, allowing one spouse to leverage their gift tax exemption to establish a trust for the other, who then accesses the trust's assets.

Engaging with financial advisors is crucial to navigate the complexities of state-specific estate and gift tax laws, which vary widely and affect overall tax obligations and estate planning strategies.

As federal tax exemptions are about to sunset, this is a critical time for Alight employees to review and possibly revise their estate and gifting strategies. These calculated decisions can lead to more efficient wealth transfer to future generations and significant tax savings.

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When making these choices, it is advisable for professionals and retirees to consult with advisors to formulate their plans in light of current tax rules and potential future changes.

For Alight employees retiring or nearing retirement, consider establishing a Qualified Personal Residence Trust (QPRT) in 2024. A QPRT allows homeowners to transfer their residence into a trust, residing there for a designated period, potentially reducing the taxable value of their estate. This strategy is particularly valuable ahead of potential reductions in exemption amounts post-2025, enabling high-value assets to be transferred at a reduced tax cost.

Like a gardener preparing for a fruitful season, the upcoming changes in inheritance and gift tax laws in 2024 are an excellent opportunity for Alight employees to strategically transfer wealth and make impactful gifts. The expanded exemption levels, akin to fertile soil, facilitate the management of estates to minimize tax implications and maximize growth for future generations. Acting now, before these favorable conditions sunset in 2025, is like planting a crop at the optimal time to ensure a bountiful harvest for years to come.