You are working hard – building wealth, utilizing retirement accounts, and maybe already talking with financial advisors. You have a clear path to the goals you set for yourself long ago – even if they may have changed a bit as life ebbs and flows. So, what happens next? We hear a lot about planning for retirement, but estate planning is equally important. The latter requires foresight, but it also ensures that your loved ones are taken care of and that your hard work now can still benefit them later. To efficiently protect your well-cultivated retirement assets from creditors, and distribute them to your chosen beneficiaries, a See-Through Trust should be explored and created. See-Through Trusts are a key estate-planning tool, but there are a few things you should know before moving forward.
It’s often difficult for us to think of the future as individuals, and even harder to think about it in terms of our larger counterparts, such as the businesses that we own and run. This is particularly true if it involves planning for the worst possible outcomes in our future, such as unexpected retirement, potential disability, or untimely death. When you build your own business and watch it flourish from the ground up, it can be disheartening to think of the possibilities of its disbandment or transfer to a new owner.
In November’s recent election, California passed Proposition 19 (Prop 19), which has changed two important California property tax assessments that could have a lasting impact on your estate planning.
In 2017, a window was opened. And at the end of 2025, that window will close. This breath of fresh air was granted by the passing of the Tax Cuts and Jobs Act (TCJA) of 2017, which increased the Basic Exclusion Amount (BEA) from $5 million to a new base of $10 million (indexed for inflation after 2011) for gifts and inheritances bestowed from 2017 through the end of 2025. Though there are many motivations for lifetime gift-giving, it is often a strategy to maximize the value of wealth and inheritance while minimizing its subjectivity to taxation as much as possible. An estate tax is technically calculated as a combined value of lifetime gifting and taxable estate, but lifetime gifting also has the added benefit of removing the appreciation of the amount gifted from the value of the estate, so the incremental amount is not subject to the estate’s overall taxation. And of course, there are some gifts that are exempt from taxation altogether, like annual exclusion gifts of $15,000 or less per recipient and direct payments of medical expenses or school tuition. The Tax Cuts and Jobs Act has opened a window of gifting for those looking at federal estate taxes, but this legislation has an expiration date of January 1, 2026, at which time the $10 million bases will revert back to the $5 million base and the ability to take advantage of the increased estate and gift tax exclusions will cease. We are currently in an important opening of opportunity that should not be missed.
With the introduction of the Setting Every Community Up For Retirement Enhancement (SECURE) Act in effect as of January 1, 2020, new and big changes have been made that affect one large aspect of retirement accounts: the payout process for beneficiaries. Previously, those who inherited someone’s retirement account were able to spread withdrawals from the account over the course of their lifetime. However, under the SECURE Act, beneficiaries are now required to withdraw all funds from an account within a 10 year period.
With the COVID-19 pandemic at large and death rates continuing to rise, the US now has more known cases than both China and Italy. During this current crisis, it’s best to remain calm and use this “stay well at home” time to do things you’ve been putting off. One such thing that may be worth considering during this unprecedented situation is setting up an estate plan.
In this modern age, our digital life has become almost as important as our normal everyday lives. Our online accounts, emails, social media profiles and digital subscriptions are all a part of our daily routines, so it’s natural to think about what will happen to them when you pass away. An estate planning attorney can … Read moreHow to Incorporate Your Digital Life into Your Estate Plans