Clary Redd of Stinson LLP wrote a column titled “Emerging Topics and Trends to Follow” for Trusts & Estates.
His column discusses various tax and non-tax estate and trusts planning strategies, which are gaining traction and are here to reshape the estate planning scene this year and beyond.
With 2026 just around the corner, Redd says there should be serious discussions about federal estate and gift tax matters. He suggests that the basic exclusion amount set by the 2017 Tax Act will unlikely be retained come January 1, 2026.
Redd stresses that numerous clients are not waiting for 2025 before they act. Instead, they realize the advantages of eliminating post-gift investment returns from their potential taxable estates.
Spousal Lifetime Access Trust (SLAT)
SLAT has become a popular choice for those who want to enjoy the benefits of trust without losing control, according to Redd. He explains that using SLATs is expected to grow in 2024.
A well-thought SLAT offers similar advantages to transferring assets while keeping some benefits without getting caught up in specific tax rules.
Step Transaction
Redd warns that the step transaction doctrine can be tricky for those unaware of its implications. To avoid falling into this trap, he suggests a few methods:
- Allow ample time (at least a few months) to pass before the wealthier spouse gives a gift to the poorer spouse and vice-versa.
- Ensuring the richer spouse’s gift to the less wealthy spouse and the less wealthy spouse’s gift afterward are not the same thing or in the same amount.
- Make sure to document and ensure that, at the time of the gift to the poorer spouse, there is a clear understanding that the wealthier spouse’s upcoming gift is absolute and unrestricted. The poorer spouse should be free to keep the gifted property indefinitely or dispose of it in any way and at any time, and this understanding should be well-documented.
Investing in Environmental, Social and Governance (ESG)
According to Redd, choosing to invest in Environmental, Social, and Governance (ESG) matters doesn’t necessarily mean giving up financial gains. However, he suggests trustees should be careful about ESG investments if they focus on something other than making money.
Redd explains that trustees who invest with personal, non-economic motives, even if it results in lower returns on trust investments, violate their duty of loyalty to the beneficiaries.
On the other hand, if a trustee can make an ESG investment that makes just as much or more money than different types of investments, there shouldn’t be any reason for complaints under the traditional prudent investor rule.
Indemnifying Trustees
Redd predicts an increase in matters related to trustee indemnification. He examines the case of Barbara Hastings et al. v. PNC Bank NA shedding light on how the release and indemnification of a trustee of a terminating trust can be carried out.
Known for his outstanding national reputation, Redd is recognized for finding innovative solutions to complex issues, efficiently resolving family disputes, and offering practical advice for both current and future generations.
His work encompasses intricate estates, trusts, and estate planning projects, with a deep involvement in the legal and practical aspects of preserving and passing on wealth. In 2023, the Estate Planning Council of St. Louis honored Redd with the Distinguished Estate Planner of the Year Award.
Clary is Co-Chair of the Editorial Advisory Board and a Trusts & Estates magazine columnist. He often speaks and writes on trusts and estates, leading presentations in the Cannon Financial Institute’s monthly estate planning teleconference series.