Author: Jeff Sharp
With all the noise in Washington, many people ignore the chatter and only pay attention once something becomes law. When it comes to estate taxes, however, it’s time to listen up. Today’s higher estate and gift tax exemption ($11.58 million per individual for 2020) will become a thing of the past. Under current law, the exemption will automatically sunset on January 1, 2026, shrinking the amount to $5 million (adjusted for inflation). Worse yet, depending on the 2020 election, Congress may even vote to reduce the exemption further and sooner.
Charitable contributions are a vital part of our social fabric. While they are intended to help recipients, they can also benefit donors when the right charitable giving strategies are used. It may seem convenient to simply write a personal check to a charity, but that should be a last resort for most taxpayers. When you write a check, you’re sending off money that was likely taxed before making its way into your bank account – money that’s worth 100 cents on the dollar.
There has been a lot written about when to collect Social Security benefits. Despite this, most retirees remain confused – and rightly so! This area of financial planning is very complicated with general rules and a host of exceptions to those rules. Moreover, searching for advice at your local Social Security office may result in conflicting recommendations on the best strategy.
Are you considering surrendering an annuity contract or purchasing a new one? Annuities have been the brunt of considerable criticism lately and consumers are getting mixed signals. There are TV commercials that joke that death is a better option than purchasing an annuity, but the fact is over $200 billion was deposited into annuity contracts in 2017. So who’s right? Is there a middle ground where sometimes annuities make sense while other times they don’t?
Figuring out what will happen to all of our assets when we die can be time consuming. As a result, many people simply avoid it altogether. Breaking news – everyone eventually passes on, we just don’t know when! It could happen today, tomorrow or decades from now. The fact is, death is certain and it’s important to prepare for it. With more than three decades of estate planning experience, I’ve seen it all. If there is one thing I’ve learned, it’s that procrastination reigns. People don’t want to deal with death, so heirs are often left with a veritable scavenger hunt, trying to sort through their loved one’s assets and figure out what he or she wanted done with it all. You don’t have to burden your heirs with such an emotional and time-consuming task. Below I’ve outlined my pragmatic list of things to do from both a financial and non-financial standpoint.
The good news is that you’ve done well financially and established a sizeable net worth. The bad news is that you now have some tough estate planning decisions to make.
High net worth families need to consider whether they should begin gifting assets to their children and grandchildren now, or retain the assets until death and then distribute. With the convergence of income and estate tax rates, parents and their advisors need to analyze numerous and competing variables when implementing a wealth transfer plan that meets their financial goals and needs.