Tax and wealth management planning for your family and business (2024)

A must-have guide to making the most of the 2024 tax season

Rising inflation, rising interest rates and rising geopolitical uncertainty — 2023 has been a bumpy ride. As you approach the 2024 tax season, private wealth owners — including multi-generational families and their businesses — need to stay buckled in and focused on key considerations that can have a significant impact on your tax situation.

By keeping these key considerations in mind and working closely with your financial and tax advisors, you can create a tax plan that focuses on your savings while navigating upcoming tax implications effectively. Our annually updated guide to tax and wealth planning is intended to help you have these conversations.

Remember to discuss available tax deductions and special considerations with your tax advisor before executing any transactions. With careful planning and proactive decision-making, you can make the most of the 2024 tax season.

2024 guide to tax and wealth planning Download the full report

Key tax planning considerations for this tax season

Despite the challenges posed by the current economic climate, there are strategies that, with the guidance of your financial and tax advisors, you can employ to enhance your tax planning.

Intra-family loans and mortgages
Intentionally defective grantor trust (IDGT)
Grantor retained annuity trust (GRAT)
Charitable lead trust (CLT)
Sale of a private annuity
CARES Act flashback and TCJA forecast
Converting a traditional IRA to a Roth IRA

Intra-family loans and mortgages

In a high-interest-rate environment, one such consideration is the option of intra-family loans and mortgages. Instead of making outright gifts, you can loan cash to family members, which can result in significant transfer tax savings. Even with interest rates at 20-year highs, a family loan at the required minimum rate may still be much lower than a rate obtained on the open market.

Intentionally defective grantor trust (IDGT)

An IDGT is a type of irrevocable trust that can provide tax advantages funded by the settlor that is structured as a grantor trust for federal income tax purposes. The grantor can make a gift to the trust, or sell property to the trust, in return for an installment note bearing interest at the Applicable Federal Rate (AFR). Be aware: The trust still may need a “seed” gift. Or, if an IDGT is already established and provides for the power to substitute assets, a grantor may consider swapping the trust’s assets with any undervalued assets personally held.

Grantor retained annuity trust (GRAT)

For individuals looking to transfer the growth of assets to the next generation, a grantor retained annuity trust (GRAT) can be a useful tool. This type of trust allows you to transfer the growth of assets in excess of the Section 7520 interest rate to the next generation. GRATs are especially effective for assets with high upside growth potential and are relatively low-risk even if the assets do not increase above the hurdle rate.

Charitable lead trust (CLT)

For those interested in philanthropy, donors can leverage a charitable lead trust (CLT) to make annual transfers to a charity or charities for a specific period of time. This may allow for the appreciation of trust assets to benefit future generations with minimal transfer tax implications. CLTs are particularly beneficial for assets with high appreciation upside.

Sale of a private annuity

Another consideration is the sale of a private annuity, which involves transferring property in exchange for the unsecured promise to make periodic payments to the transferor for their lifetime. The annuity is calculated based on the fair market value of the property conveyed, the transferor's life expectancy, and the AFR at the time of the sale.

CARES Act flashback and TCJA forecast

It's also important to be aware of additional business-related tax changes. The Coronavirus Aid, Relief and Economic Security (CARES) Act of 2020 modified or temporarily suspended several provisions of the 2017 Tax Cuts and Jobs Act (TCJA), but those provisions are now back in effect. These changes include the reinstatement of the limitation on excess business losses, the elimination of carrybacks for certain net operating losses and the Section 163(j) interest deduction limitations, among others.

Considering almost all of the provisions of the TCJA, including the increased lifetime estate and gift exemptions, are set to expire at the end of 2025, utilizing your lifetime exemption for gifts in 2024 and 2025 (before limits revert to prior levels) is prudent.

Converting a traditional IRA to a Roth IRA

There’s been lots of talk about Roth IRAs lately — and with good reason. There are benefits worth considering in converting a traditional IRA to a Roth. This strategy involves paying income tax immediately on the value of converted assets. It can be particularly attractive for IRAs with low current value compared to expected future value — like low-value shares of a young company that has a good outlook for growth. Bearing in mind your unique circ*mstances and individual rates, this additional step may help you engage with your tax advisor in creating a plan that may result in improved tax savings.

IRS’ eye fixed on high-income, high-wealth individuals

Advances in technology aren’t just scaling business operations — they’re helping the Internal Revenue Service, too. Using enhanced digital tools, the IRS is prioritizing examinations and possible audits of certain taxpayers. In a September 2023 news release, the IRS announced that in 2024, dozens of revenue agents will focus on high-income, high-wealth individuals who either have not filed their taxes or have recognized tax debt. The IRS previously announced that it had begun contacting about 1,600 taxpayers with more than $1 million in income and more than $250,000 in recognized tax debt.

This initiative on the part of the IRS is not likely to go away any time soon — the agency announced that it’s already collected $122 million in 100 of 1,600 cases.

Advances in technology aren’t just scaling business operations — they’re helping the Internal Revenue Service, too.

Considerations for a family office

A family office facilitates and oversees the wealth planning of a family so that short-term needs are adequately met along with achieving the family’s long-term goals. Often, families leverage a family office structure to coordinate services such as estate and tax planning, investment and legal services and other administrative activities, all in one place, to maximize privacy and efficiency. Learn more about the different family office structures and functional capabilities to consider when setting up a family office, and ways to address common family office challenges.

Family office structures

First, start with understanding your strategy and desired legacy as the foundation. Then, align the other functional capabilities of your family office to support your family’s vision.

Business continuity and succession planning for a family business

Sound planning is key to a successful transfer of ownership and control in a family business, but it can be a daunting task. When families align individual legacy to shared purpose, they are more likely to make decisions that benefit their long-term success. Learn more about the three main types of succession (leadership, board, and ownership), and key planning considerations for each.

Three-circle model of the family business model

About PwC’s Guide to Tax and Wealth Planning

PwC's trusted guide to tax and wealth planning is diligently updated each year to offer you the most up-to-date tax planning insights, enabling you to strategically secure your family's future and effectively manage your wealth. Our comprehensive guide not only addresses a multitude of tax-related issues and policies but also provides invaluable information on establishing and maintaining a family office, as well as crafting strategies for business continuity and succession planning within family businesses.

We’re here for you

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 to explore the content presented in our guide further. Our specialists are eager to discuss how these strategies can be customized to your specific needs and goals.

Frank Graziano, US Personal Financial Services Leader

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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Now, let's delve into the concepts highlighted in the article about making the most of the 2024 tax season:

Intra-family loans and mortgages:
- In a high-interest-rate environment, consider intra-family loans instead of outright gifts.
- Loaning cash to family members can result in significant transfer tax savings, even with interest rates at 20-year highs.
Intentionally Defective Grantor Trust (IDGT):
- IDGT is an irrevocable trust providing tax advantages funded by the settlor.
- Structured as a grantor trust for federal income tax purposes.
- The grantor can make a gift to the trust or sell property to the trust, offering flexibility in asset management.
Grantor Retained Annuity Trust (GRAT):
- Useful for transferring the growth of assets to the next generation.
- Allows transfer of assets exceeding the Section 7520 interest rate to beneficiaries.
- Effective for assets with high growth potential and relatively low risk.
Charitable Lead Trust (CLT):
- Enables donors interested in philanthropy to make annual transfers to charities.
- Appreciation of trust assets can benefit future generations with minimal transfer tax implications.
- Particularly beneficial for assets with high appreciation upside.
Sale of a Private Annuity:
- Involves transferring property for the promise of periodic payments to the transferor's lifetime.
- Annuity calculated based on fair market value, transferor's life expectancy, and the Applicable Federal Rate (AFR).
CARES Act Flashback and TCJA Forecast:
- Be aware of business-related tax changes, including those from the CARES Act of 2020.
- Consider utilizing lifetime exemption for gifts in 2024 and 2025 before the expiration of TCJA provisions in 2025.
Converting a Traditional IRA to a Roth IRA:
- Consider converting a traditional IRA to a Roth for potential tax benefits.
- Pay income tax immediately on converted assets.
- Particularly attractive for IRAs with low current value compared to expected future value.
IRS Focus on High-Income Individuals:
- IRS using enhanced digital tools to prioritize examinations and audits of high-income, high-wealth individuals.
- Initiative ongoing in 2024, with significant collections from targeted cases.
Considerations for a Family Office:
- Family offices coordinate wealth planning, investment, legal services, and more for families.
- Different family office structures and functional capabilities should align with the family's vision.
Business Continuity and Succession Planning for a Family Business:
- Key to a successful transfer of ownership and control in a family business.
- Align individual legacy with shared purpose for long-term success.

This information is crucial for private wealth owners and families as they navigate the complexities of the 2024 tax season. It's essential to work closely with financial and tax advisors to tailor strategies to individual circ*mstances.