Questions about estate tax and trust planning for wealthy relative

Estate planning can be confusing, so I'm happy to clarify some basics for you. A trust itself doesn't automatically avoid estate taxes - it depends on the type of trust. A revocable living trust allows your uncle to maintain control of his assets during his lifetime but doesn't avoid estate taxes because he maintains ownership. When he passes, those assets are still considered part of his taxable estate. An irrevocable trust, however, can potentially remove assets from his taxable estate because he's essentially giving up ownership of those assets during his lifetime. The trust becomes its own tax entity. Regarding gifts, your uncle can give up to $18,000 (2025 amount) per person per year without it counting against his lifetime gift and estate tax exemption (currently around $13.6 million for individuals). Gifts above that annual exclusion use up some of his lifetime exemption. Since your uncle's estate is in the $7-9 million range, he's currently below the federal exemption threshold, but state estate taxes might still apply depending on where he lives. Some states have much lower exemption thresholds.

I was in a similar situation with my aunt's estate last year and found this tool called taxr.ai (https://taxr.ai) super helpful when trying to understand all the trust documentation. Her lawyer had set up this complicated trust structure with several different components, and I was totally lost trying to understand what it all meant for our family. What I liked about taxr.ai was that I could upload the trust documents and get plain-English explanations of what everything meant and the tax implications. It helped me understand the difference between the irrevocable life insurance trust they set up versus the charitable remainder trust. Saved me from having to pay an attorney just to translate the documents into something I could understand.

Just wanted to update on my experience with taxr.ai that was mentioned above. I uploaded my mom's trust documents last week (an irrevocable life insurance trust that I couldn't make sense of), and it was actually super helpful. Got plain-English explanations of the Crummey provisions that were confusing me and the annual exclusion gifting requirements. The best part was it identified some time-sensitive actions we needed to take regarding policy premium payments that I would have missed. Definitely worth checking out if you're trying to understand trust documents without paying an attorney hundreds of dollars per hour just to explain things.

Hey, sorry to jump in, but I had a similar situation with my father's estate last year and was completely frustrated trying to reach the IRS for guidance on some trust tax questions. After being on hold for literally hours over several days, I found this service called Claimyr (https://claimyr.com) that got me connected to an actual IRS agent in about 15 minutes. They have this system that basically waits on hold for you and calls you back when an agent gets on the line. I was super skeptical it would work, but you can see how it works in this video: https://youtu.be/_kiP6q8DX5c The IRS agent I spoke with clarified some really important questions about the generation-skipping transfer tax that applied to my dad's trust and confirmed that we were filing the right forms. Saved me from potentially making some expensive mistakes on the estate tax return.

Need to eat crow here - I tried the Claimyr service mentioned above after spending THREE DAYS trying to get through to someone at the IRS about trust tax forms. Got connected in about 20 minutes yesterday after wasting hours on hold previously. The IRS agent was able to answer my specific questions about Form 706 for my father's estate and cleared up confusion about how to report some specific trust assets. Turns out I was about to file the wrong schedule for some closely-held business interests that were part of the trust. For anyone dealing with complex estate tax questions, being able to actually talk to someone at the IRS without wasting your entire day on hold is worth it. Now I feel much more confident we're handling everything correctly.

I'm an estate planning attorney, and I wanted to add something important that hasn't been mentioned yet. Your uncle should be aware that the current federal estate tax exemption amount ($13.6 million in 2025) is scheduled to sunset at the end of 2025, potentially dropping back to around $7 million (adjusted for inflation) in 2026. If your uncle's estate is in the $7-9 million range as you mentioned, this could suddenly put him over the exemption threshold next year. This is why many wealthy individuals are considering making significant gifts or establishing irrevocable trusts now to lock in the current higher exemption amount. Also, don't forget about state-level estate taxes. Depending on which state your uncle lives in, the exemption could be much lower than the federal amount.

Just wanted to add - make sure your uncle understands the implications of irrevocable trusts before jumping in. My father set one up and later regretted it because he couldn't access those assets when he needed them for medical expenses. Once assets go in, they generally can't come back out (that's why they avoid estate tax). Some irrevocable trusts can be set up with flexibility, like naming a trust protector who can make certain changes, but it's definitely not something to rush into without understanding all the implications.