Thursday, October 8, 2020
Although 2020 has seemed to drag on for an eternity, it is closely coming to an end. This means, it is time to do a review and possibly an update of your estate plan. There are a few things that you should take into consideration as you are looking towards making changes to your estate plan.
Discussed below are a few considerations that you may want to keep in mind as you take on this estate planning journey.
Year-End Gift Giving
Federal gift tax exemptions are at an all-time high sitting at $11.58M per person. As the end of the year is approaching, and a presidential election coming up next month, this is a "use-it-or-lose-it type of exemption. Potential effective areas to take advantage of this exemption are:
- Marketable securities
- Business interests
- Charitable gifts
- Appreciated long-term capital assets
Estate and gift tax planning rollbacks may be an area which you should apply more focus. Come 2026, the exemption is set to roll back making the exemption amount $5M. If taxpayers fail to take advantage of the exemption before December 31, 2020, they might lose the exemption. This is why it is a great time to consider making a lifetime gift.
Year-End Charitable Giving
"The 2020 Coronavirus Aid, Relief, and Economic Security Act (CARES Act) encourages additional charitable giving in 2020." The Act increases the "charitable deduction adjusted income percentage from 60% to 100% for itemizing taxpayers."
Year-End Planning for Income Tax Issues
Future tax situations are up in the air and time is running out for taxpayers to discuss with their tax and estate planning professionals. Possible changes include:
- Individual income tax rates—state and federal
- Carry back losses
- Basis or cost
- C corporation losses
- 1031 Exchanges
- Capital gain rates
- Estate and gift tax exemption amounts
- Suspension of required minimum distributions for qualified retirement plan accounts
Refer to the article cited below for a in depth discussion of valuations and how valuation issues may come into play.
See Carmen Calzacorta, Matthew Bisturis, Dan Eller, Alicia Lowe, June Wiyrick Flores, Samantha MacBeth, & Thomas Tongue, Estate Planning and Business Transition Issues Not to Overlook Before the Year-End, Schwabe, Williamson, & Wyatt, October 6, 2020.
Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.