• Many estate plans are outdated, improperly executed, or non-existent.

• Trusts can protect family assets and support responsible inheritance.

• Open communication with heirs about roles and expectations can reduce future conflicts and confusion.

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According to a survey from LegalShield, nearly 60% of U.S. adults don’t have a will — even though 90% acknowledge they need one. Even among those with estate planning documents in place, 22% have never updated them. They may have missing or incorrect beneficiaries or improperly titled assets, diminishing the legal protection those documents were designed to protect from probate.

These numbers tell us that a significant number of families are unprepared to transfer wealth effectively or protect it for future generations. Many beneficiaries also mistakenly believe that what they inherit will be taxed as income — a common misconception that can add unnecessary confusion to the process.

For families looking to preserve wealth while empowering heirs to manage their inheritance responsibly, trusts can offer long-term benefits when implemented with care and updated regularly. In this article, we’ll examine several potential trust structures and provide guidance to help your family achieve its wealth preservation goals.

Why Trusts Matter for Generational Wealth

A well-structured trust can:

• Safeguard assets from creditors, lawsuits, and potential divorces

• Provide a framework for responsible access to funds

• Support heirs with varying levels of financial maturity

• Maintain family intentions across multiple generations

• Reduce the administrative burden on surviving family members

But the real value lies in thoughtful design and consistent maintenance. Setting up a trust isn’t a one-time activity; you must revisit and update it periodically to reflect changes in your growing family, financial circumstances, and state laws.

Here are a few different trust structures that can help you achieve your goals:

Dynasty Trusts

A dynasty trust can last multiple generations — potentially hundreds of years in some cases. These trusts keep inherited assets outside of each heir’s taxable estate, reducing exposure to estate taxes over time. They can also be structured to distribute income or principal according to specific rules, helping beneficiaries avoid overspending or becoming financially dependent on the trust.

These trusts help preserve the value of large estates across generations by shielding inherited assets from estate taxes, creditors, or future divorces. They also allow grantors to express family values through distribution requirements — like completing college or maintaining employment.

Because a dynasty trust can span decades, it’s crucial to choose a trustee (or succession of trustees) with clear oversight protocols.

Spendthrift Trusts

For families concerned about a beneficiary’s spending habits or personal stability, a spendthrift trust adds another layer of protection. These trusts restrict a beneficiary’s ability to access or assign their interest in the trust to others, preventing them from squandering the funds or using them as collateral for personal loans.

Spendthrift provisions can stand alone or be added to a broader irrevocable trust. They are especially helpful when a beneficiary struggles with addiction, financial discipline, or legal troubles.

This type of trust requires a trustee who can exercise discretion over distributions, so it’s usually best handled by a neutral third party rather than an heir.

Irrevocable Trusts

An irrevocable trust permanently transfers ownership of assets out of the grantor’s estate. Once established, the grantor no longer has control over the assets and changes generally require court approval or beneficiary consent.

Though less flexible than revocable living trusts, irrevocable trusts are often used to reduce estate tax exposure, protect assets from lawsuits or future claims, or facilitate Medicaid planning or other eligibility-based programs.

They can also hold life insurance policies, real estate, or business interests, helping families plan for liquidity and facilitate a smooth transition across generations.

Addressing Common Estate Planning Pitfalls

Even when a trust is in place, several issues can undermine its effectiveness:

• Improper titling of assets: Assets must be formally retitled into the name of the trust. A mismatch between legal documents and account ownership may derail the estate plan.

• Beneficiary adjustments: Make sure the beneficiary designations on accounts like life insurance and retirement are aligned with the beneficiary on the trust. Mismatches are common and can undermine your estate plan.

• Outdated documents: Wills and trusts prepared a decade ago most likely do not reflect your family’s current situation. Review and update the plan after life events like marriage, divorce, births, deaths, disability, or significant changes in assets.

• Lack of preparedness: Set to take place over the next two decades, the Baby Boomer generation’s “Great Wealth Transfer” will move an estimated $84 trillion to spouses, dependents, and charities. Most heirs have no idea how much they will inherit, or even where to find estate documents in the event of a parent’s death or incapacity. At a minimum, connect heirs with the estate attorney who has the documents.

• Lack of communication: In many cases, family conflicts arise not from a lack of resources but from a lack of communication. Parents who explain their estate decisions ahead of time, such as why they selected a particular child to be an executor or trustee or how real estate will be divided, help reduce confusion and resentment. Including a written letter of intent with estate documents provides additional context beyond the legal language.

• Naming multiple co-executors: Many parents name two or more adult children as co-executors or trustees to be “fair”. In reality, this creates gridlock when siblings can’t agree on next steps. If you believe putting one sibling in charge will breed conflict, consider naming an independent trustee — like a corporate trustee service — instead.

How MGO Can Help

Trusts can protect wealth, but the real protection comes from thoughtful planning, proactive communication, and timely updates.

At MGO, we work with families to assess current estate tax exposure and identify and design appropriate estate tax minimization structures to align with your ultimate goal. We also help facilitate family discussions and connect heirs with the right advisors to assist in smooth transitions of estates.

Whether you’re establishing a trust for the first time or reevaluating an outdated estate plan, our team can provide insight into trust strategies tailored to your family’s values, financial goals, and long-term objectives.

Contact us today to explore how we can support your family with your estate planning.

The post Trust Structures to Protect Your Family Wealth and Empower the Next Generation appeared first on MGO CPA | Tax, Audit, and Consulting Services.

• High-net-worth individuals often have multiple income streams and need to coordinate tax strategies across entity types and asset classes.

• The proper structuring of investments can often have a significant positive impact on the economic gain realized.

• Start to plan at least 18 to 24 months before the sale of a closely held business to ensure proper structure, boost business valuation, and improve after-tax outcomes.

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You’ve built significant wealth. As a result, taxes have become more than just a line item in your budget — they’re a force that can quietly erode your returns, complicate your business exit, and reshape your legacy.

Fortunately, you have a window of opportunity to take control. Proactive tax planning can help you align today’s strategies with tomorrow’s vision — whether you’re juggling multiple businesses, eyeing a potential sale of an investment, or preparing to transition out of your company.

This article examines how to approach tax planning to maximize your earnings and stay ahead as tax laws shift.

Understanding the Tax Implications of Different Income Streams

The average high-net-worth individual typically has around seven income streams. These can include salaries and wages, pensions and annuities, interest, dividends, capital gains, rental and royalties, business profits, and more.

Each type of income can face different tax rules and rates — which makes planning across all sources critical.

For example, you might defer income into years where your marginal rate is lower (such as in retirement or during a gap year after a business sale), accelerate deductions in high-income years to offset earnings, or swap investment property using a 1031 like-kind exchange to defer recognition of capital gains.

Strategically harvesting investment losses can also help manage bracket thresholds and your exposure to the net investment income tax (NIIT).

Also, consider how you generate income through various entities. Sometimes, an investment’s structure can have a greater impact on tax outcomes than the investment itself.

For example, at the federal level, income from a C corporation is taxed at both the corporate (21%) and shareholder levels (up to 23.8% on dividends), resulting in effective tax rates that leave less than half of earnings in your control once you layer in state taxes. In contrast, S corporations and other passthrough structures may offer favorable pass-through treatment and qualify for a QBI deduction (20% of the business income).

Planning for Business Exits with Taxes in Mind

Selling a closely held business may be a once-in-a-lifetime event. The company may make up a large portion of your net worth and, with so much at stake, the tax treatment of the sale can dramatically alter the outcome.

We recommend that business owners start preparing for a sale at least 18 to 24 months in advance. But even if a sale isn’t on the immediate horizon, business owners should operate as though the company is always “for sale”. Opportunities often arise unexpectedly and financials that aren’t sale-ready can delay or derail a deal. Minimize all working capital kept in the business for at least the year preceding a sale. You will not be paid any more money for a business with a ton of working capital versus the minimum.

A knowledgeable CPA can help you identify red flags, clean up reporting, and implement strategies that improve the business’s financial profile so you’re prepared to act when the timing is right.

A longer timeline gives you runway to halt unnecessary reinvestment and boost earnings before interest, taxes, depreciation, and amortization (EBITDA) — directly affecting the sale price and reducing excess working capital.

Structuring the Deal

The structure of a sale plays a crucial part in the tax treatment of potential gains. Many sales of closely held businesses take the form of asset sales rather than stock sales, mainly because asset purchases offer more favorable terms to the buyer. When a buyer purchases the company’s assets, they avoid inheriting legacy liabilities and can allocate the purchase price among depreciable assets for future tax benefits.

However, even for transactions legally structured as a stock sale, buyers may use a Section 338(h)(10) election to treat the deal as an asset sale for tax purposes. This hybrid structure provides the buyer with the benefits of an asset acquisition while technically acquiring the stock.

From the seller’s perspective, both methods can yield similar tax outcomes. The gain from the sale typically flows through to the owner as a capital gain. If any portion of the purchase price is allocated to depreciated fixed assets, there may be a small amount of ordinary income due to depreciation recapture. As long as the owner is actively involved in the business at the time of sale, it’s generally exempt from the 3.8% NIIT.

In some cases, especially in deals involving private equity, buyers want to retain the existing owner’s involvement, so the buyer may acquire a majority interest and require the seller to continue managing the business. This is often structured through an F-reorganization, which allows for tax deferral on the portion of the business not immediately sold.

Another common feature of modern deals is the earnout: a portion of the sale price that’s paid over time based on the company’s future performance — usually tied to EBITDA targets. Earnouts can create significant tax planning opportunities and risks when they extend over several years.

Finally, for owners concerned about a large tax hit, investing the gain into Qualified Opportunity Zone (QOZ) funds can provide a way to defer capital gains and potentially reduce future taxes. This benefit was made permanent by the One Big Beautiful Bill Act.

Working closely with a CPA who understands these nuances allows you to align the terms of the sale with your broader financial goals.

Potential Section 1202 Tax Saving Strategies

Selling qualified small business stock (QSBS) may qualify for Section 1202 treatment. This tax provision allows individuals to avoid paying taxes on up to 100% of the taxable gain recognized on the sale of QSBS. The gain exclusion is worth $10 million or 10 times investment basis and applies to C Corporation stock issued after August 10, 1993, and before July 4, 2025, held for at least five years.

The recently passed One Big Beautiful Bill Act increases the Section 1202 exclusion for gain to $15 million or 10 times basis for QSBS acquired after July 4, 2025, and held for at least five years. There is a reduced gain excluded if the stock issued after July 4, 2025, is only held for three years (50% exclusion) or four years (75% exclusion).

Section 1202 creates an effective tax rate savings of up to 23.8% for federal income tax, and many states follow the federal treatment — resulting in even more substantial savings.

How MGO Can Help

Tax outcomes are rarely 100% predictable, but we can help shape them with foresight and planning.

Now is the time to take a closer look at your income, investments, and business interests. Don’t wait until the tax code changes. Schedule a planning session with an MGO advisor to start building a roadmap today.

The post Proactive Tax Planning Strategies for Exiting Your Closely Held Business appeared first on MGO CPA | Tax, Audit, and Consulting Services.

• Most Americans lack an up-to-date estate plan, leaving inheritances at risk of delays, disputes, and unintended distributions.

• Wills and trusts help clarify intentions, avoid probate, and protect beneficiaries.

• Review and update estate plans regularly — especially after major life events — to reflect changes in family structure, assets, and federal and state laws.

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The U.S. is on the precipice of the largest generational transfer of wealth in history. Baby Boomers account for 51.8% of the country’s total wealth, and over the next two decades (through 2045) an estimated $68-84 trillion will transfer to their spouses, descendants, trusts, and family foundations.

This massive shift will affect millions of families, yet too many are unprepared — both those who will pass on wealth and those who will inherit it. Despite rising awareness of the importance of estate planning, an estimated two-thirds of Americans don’t have any estate planning documents (wills, living trusts, healthcare directive, durable power of attorney, etc.), and won’t bother until a medical diagnosis or the death of a family member compels them. And those who do prepare estate planning documents typically either: (1) fail to update them on a regular basis, or (2) don’t place their assets in the trust’s name — subjecting those assets to probate and court proceedings.

One recent development adds even more urgency to the need for estate planning conversations. The newly enacted One Big Beautiful Bill Act (OBBBA) permanently raises the federal estate tax exemption to $15 million per person or $30 million for married couples (with proper planning) starting in 2026. This increase shields more wealth from the 40% federal estate tax and creates new planning opportunities for high-net-worth families.

With more flexibility under the new exemption levels, now is the time to take a look at your estate plan. A thoughtful and regularly updated estate plan is essential for families looking to preserve and pass on wealth. Here’s what that entails:

Start With the Fundamentals: Wills and Trusts

A will outlines how you want your assets distributed after your death and names guardians for minor children (if applicable). Without one, the state’s intestacy laws take over — which can delay the process and distribute assets in ways you may not have intended.

Certain trust structures take it a step further by allowing assets to bypass probate. This saves time, reduces legal and administrative fees, and helps maintain privacy. Trusts also offer greater control over how and when beneficiaries receive assets. This is particularly important for families with minor beneficiaries, blended families, or those with concerns about their heirs’ financial readiness.

Creating these documents is only the beginning. One common breakdown in estate plans comes from mismatched asset titling. For example, a trust may be established to hold real estate or investment accounts. But, if the assets are still titled in the individual’s name, they may fall outside the scope of the trust — requiring them to go through probate like any other asset.

After establishing a trust, review every asset — including bank accounts, brokerage accounts, and real property, to ensure correct titling and beneficiary designations.

Revisit and Refresh as Life Changes

Estate planning is not a one-time task. Documents drafted years ago may no longer reflect your current family structure, financial picture, or wishes.

Too often, we see wills and trusts that were never updated after:

• Marriage, divorce, or remarriage

• Birth or adoption of children or grandchildren

• Total disability of a beneficiary

• Death of a named trustee or beneficiary

• Significant changes in wealth or business ownership

Additionally, federal and state laws are constantly evolving — and these changes can have profound effects on your estate plan. Schedule time for a full estate plan review every three to five years, or after major life events.

Leverage Gifting to Reduce Estate Size

Structured gifting can be a powerful yet simple way to reduce the taxable value of an estate, especially for families with closely held business interests.

In 2025, individuals can gift up to $19,000 annually to any number of recipients without using their lifetime exemption or filing a gift tax return. Married couples can gift $38,000 per recipient.

For high-net-worth families, these amounts may not be significant enough to matter on a year-to-year basis. However, when multiplied over several recipients over a decade or more, the total can be substantial.

For example, if a couple gifted $76,000 annually to an adult child and their spouse, that’s $760,000 over a decade. That amount is removed from the estate and potentially sheltered from the 40% estate tax.

This strategy can also include gifting fractional shares of a closely-held business to heirs over time. Doing so gradually helps prepare the next generation for future ownership while reducing the size of the taxable estate.

Be sure to work with your advisors to properly execute and document these gifts to avoid triggering unwanted tax consequences or disrupting business control.

Prepare the Next Generation for What’s Coming

An estimated 15% of Americans will receive an inheritance in the next 10 years, yet most lack the financial knowledge to handle the responsibility. Often, beneficiaries are unaware of the size of the estate or the decedent’s intention — and the disconnect can create confusion, resentment, or financial missteps after a family member’s death. Most family members are under the misbelief that they will be taxed upon the receipt of an inheritance.

Open communication about inheritance plans, values, and responsibilities reduces these risks. Consider involving heirs in estate planning conversations, educating them about trusts and business succession plans, and giving them opportunities to participate (with guidance) in philanthropic or investment decisions.

Address Complex Assets Like Family Businesses

Families with significant business holdings should pay special attention to succession planning and ownership transfer structures. Options may include:

• Establishing a family limited partnership (FLP)

• Using grantor-retained annuity trusts (GRATs)

• Gifting non-voting or minority business interests gradually

• Consider having a formal buy-sell agreement

These strategies require coordination between estate planning attorneys and tax advisors to align the legal structure with business operations, tax liabilities, cash flow needs, and long-term ownership goals.

How MGO Can Help

Wealth transfer doesn’t happen automatically. Without planning, estates of any size can become a source of friction, tax exposure, or missed opportunity.

At MGO, we help individuals and families develop tailored estate strategies that reflect your values, protect your assets, and align with evolving tax laws.

If you’re ready to take the next step in preserving your legacy and preparing future generations, reach out to our team today to start the conversation.

The post Estate Planning Essentials for Seamless Wealth Transfer appeared first on MGO CPA | Tax, Audit, and Consulting Services.

• High-tax states may challenge changes in residency — scrutinizing the number of days spent in the state, domicile intent, and income allocations.

• Income sourcing rules vary by state, increasing complexity for remote workers and business owners with sales, property, employees, or operations in multiple states.

• Strategic charitable giving can provide additional benefits at the state level.

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State and local tax (SALT) planning has become increasingly important for high-net-worth individuals as state and local governments revise their tax regulations in response to revenue needs and economic shifts. The patchwork of rules across jurisdictions brings both risks and opportunities.

High-tax states like California, Connecticut, Hawaii, Illinois, Minnesota, New York, New Jersey, and Vermont frequently introduce new regulations targeting affluent residents and non-residents who spend significant time in the state.

This article explores three critical SALT strategies: residency planning, income sourcing, and charitable giving.

Why State and Local Tax Planning Matters

Unlike the federal tax system, which applies uniformly to all U.S. residents, SALT rules vary widely from state to state and even city to city and can change rapidly.

Some states, like New York, impose high top marginal income tax rates and aggressively audit high earners who claim residency elsewhere. Others, like Florida or Texas, levy no personal income tax but may increase scrutiny around proving residency for new arrivals.

In 2023 and 2024 alone, several states enacted new tax surcharges, adjusted apportionment rules, or announced stepped-up enforcement for residency audits. As mobility increases and remote work becomes the norm, tax authorities are tightening their focus on where taxpayers earn income and where they’re truly domiciled.

Explore These 3 Key SALT Strategies

Each of the following planning areas offers a valuable opportunity to reduce state and local tax exposure:

1. Residency Planning: More Than Just a Mailing Address

Relocating from one state to another can be costly if you don’t plan for tax implications like income taxes and estate taxes — especially if you move from a high-tax state to one with little to no income tax (i.e. California to Florida). Making your move stick in the face of a state residency audit requires more than buying a home and changing your driver’s license.

“Domicile” is an important term in the tax world. It refers to your primary, permanent home. Statutory residency can apply even if your domicile is elsewhere — as long as you maintain a residence in the state and spend a threshold number of days there. For example, New York considers you to be a resident if you spend 184 days or more in the state during the taxable year. Hawaii considers you to be a resident if you spend more than 200 days of the year in the state — and those days don’t have to be consecutive.

Many states use time-based tests to determine tax residency, so maintaining a detailed log of your location or recreating the log using cell phone data or travel records can be a crucial audit defense.

Other factors tax authorities consider include where you vote, receive mail, go to the doctor, register your vehicles, and more. Residency audits can look back several years, so it’s crucial to maintain a consistent paper trail that aligns with your stated residency.

2. Income Sourcing: Where Is Your Income Taxable?

It’s also crucial to understand how income is sourced across states — particularly for taxpayers with multistate businesses, investment properties, or remote work arrangements.

States apply different rules to allocate income. Some use market-based sourcing, which sources receipts based on the location of customers (which can be determined in various ways). Other states use cost-of-performance sourcing, which sources receipts based on the location where the services are performed.

In addition to sourcing rules, states use different apportionment rules to allocate an organization’s income across states. Apportionment formulas may consider three factors (sales, property, and wages), a single sales factor, or industry-specific apportionment for certain business models or operating structures.

However, owners of businesses with revenue streams derived from multi-state customers should consider a sales sourcing assessment. A review of sales sourcing can potentially result in a decrease in the apportionment factor (leading to decreased tax liabilities) and minimize audit risks, interest, and penalties down the road.

Even working in another state for a day can lead to nonresident tax filing requirements. According to the Tax Foundation, 23 states have no meaningful nonresident individual income tax filing threshold — meaning nonresidents may need to file an income tax return if they spend a single day working in the state.

Other states have established minimum thresholds for nonresident filing requirements. For example, if you work more than 15 days and earn more than $6,000 in Connecticut, you’re required to file a nonresident return there. Meanwhile, Vermont requires nonresidents to file a tax return if they earn at least $100 in the state.

In many cases, you can claim a credit on your home state’s taxes for income taxes paid to another state. But even if filing in multiple states doesn’t increase your total tax liability, it increases the complexity of your filings.

3. Charitable Giving: Balancing Your Gifts with SALT Benefits

Taxpayers often think of charitable giving in the context of federal tax deductions, but some states offer tax benefits or credits that can increase the impact of your gifts.

Examples of SALT-friendly charitable giving include:

• State tax credit programs: Some states offer tax credits for contributions to certain types of organizations, such as school tuition programs or community foundations. Tax credits reduce your tax liability dollar-for-dollar, making them more valuable than tax deductions (which only reduce your taxable income).

• Donor-advised funds (DAFs): Contributions to DAFs allow you to bunch deductions in a year when income is unusually high due to the sale of an asset or a bonus payout. This strategy potentially optimizes both federal and state tax outcomes.

• Timing and entity selection: Consider whether to give personally or through a business in states with entity-level taxes.

Work with a tax advisor to identify state-level credits or programs that align with your philanthropic goals. Keep in mind that non-cash contributions may require a qualified appraisal and additional documentation.

How MGO Can Help

State and local tax planning and compliance are complex for taxpayers with significant income or assets across multiple states. At MGO, we work with high-net-worth individuals to help clarify your residency status, evaluate income sourcing risks, and design charitable giving strategies that align with both your personal goals and evolving state tax laws.

Our team stays current on legislative changes and audit trends across jurisdictions, helping you proactively adapt your planning. Whether you’re considering a change in residence, managing business income across multiple states, or looking to increase the impact of your charitable giving, we can provide the insight and support you need to make informed, strategic decisions. Reach out to explore how thoughtful SALT planning can support your broader financial goals.

The post 3 State and Local Tax Strategies for High-Net-Worth Individuals appeared first on MGO CPA | Tax, Audit, and Consulting Services.