Better act fast, it’s another election year and another bite at the Estate and Gift Tax

Every four years, we take a leap of faith and select our national global representative for a United States President. A lucky few get a repeat performance. Sometimes, the things that affect us individually conflict with things that affect us as a community, sometimes they don’t. A little strategic planning, foresight, timing and we can alleviate one significant individual concern – net worth and taxes. Historically, the Democrats have publicly supported lowering the threshold for the estate tax to apply, and the Republicans, as is a necessary condition for an opposing party, support the opposite. This means, if the balance in power shifts in 2020, it is likely that the temporary raised ceiling (expires after 2025) for the estate tax exemption will be cancelled, and more will be subject to the estate tax. Since 2001, the percentage either party’s stance on this issue has impacted has been between 1% and 0.07% of all decedents for the year. However, even if you are among the ultra-high net worth, some year-end estate planning can put the control back in your hands, instead of you waiting for the government to swing one way or the other.

1.       Set up a gifting plan for your most lucrative assets. If you plan to give your assets to your descendants or loved ones anyway, why not start now? If structured properly and transferred through other vehicles, such as business entities or trusts, significant control on management or decision making can be retained while ownership transferred out of your estate.
2.       Structure your estate to take advantage of historically low interest rates and use “gain freeze” for your benefit. GRATs (grantor retained annuity trusts) or CLTs (charitable lead trusts) are just some of the ways you can transfer high growth assets, lower tax liabilities significantly, and in the case of CLTs, even support your philanthropic passions.
3.       Invest in life insurance and set up trusts to hold them (and take them out of your estate). Life insurance can be asset building vehicles (especially whole life insurance policies). They can be leveraged and also used to pay off estate liabilities without needing to liquidate illiquid assets (such as successful business enterprises or family farms).
4.       Develop a charitable plan. These plans can be structured in conjunction with various other devices, such as Charitable remainder trusts, lead trusts, grantor trusts, dynasty trusts, etc., as well as family foundations and DAFs for long-term philanthropy to support causes over multiple generations and create philanthropic legacies.
5.       Consider securing retirement accounts as tax saving strategy in your business and consider allocating your charitable goals to using the retirement funds for that purpose. The tax deferral coupled with the pre-tax distribution to charities can be especially beneficial to you and your preferred charity.
6.       If you don’t have foundational estate planning in place, please prioritize this. Beyond a will, power of attorney, or healthcare documents, at your net worth, you will most certainly need to consider dynastic planning, business succession planning, possible international funds and assets, foreign asset compliance, creditor and divorce protection in future generations, and more.

All of the above can be implemented quickly and easily with a qualified team of tax advisors – trust and estate tax attorneys, financial and investment advisors, accountants, and valuation advisors. Attorneys experienced with working with ultra high net worth have the resources and relationships to set up an unique team of professionals for your specific plan and implement it seamlessly. The Royal Law Firm PLLC collaborates with several experienced accountants, appraisers, and financial advisors and can work efficiently with the advisors you already have, incorporate additional advisors, or form a team uniquely suited to your needs to put a plan in place before the end of the year. Contact us to learn more.