Many legislative changes are expected over the coming months as our country transitions to a new administration. Although the Biden administration’s plans for estate tax reforms have not been fully detailed, signals from Biden’s campaign indicate that two major changes will likely be introduced to Congress:

• Reduction of the lifetime exemption. The current $11 million lifetime exemption amount (adjusted annually for inflation) that went into place as part of the Tax Cuts and Jobs Act of 2017 (an increase from the previous $5 million exemption) is set to expire at the end of 2025. For the year 2021, individuals may gift up to $11.7 million during life or at death without gift or estate tax consequences. If left unchanged, this amount would continue to increase with inflation until 2026 when the exemption amount would return to $5 million. However, many expect that the Biden administration will propose adjusting the lifetime exemption amount downward, possibly to $3.5 million per individual.

• Elimination of the stepped-up basis for capital gains at death. Currently, inheritors enjoy the benefit of a stepped-up basis on capital assets (certain investments such as stocks and bonds, real estate, cars, etc.) upon a decedent’s death. This means that appreciated capital assets previously owned by the decedent are valued at the fair market value as of the decedent’s date of death for tax purposes. As such, any capital asset appreciation that occurred prior to the decedent’s death is not subject to capital gains taxes under current federal estate tax law. The Biden tax plan seeks to eliminate the stepped-up basis, which means that any appreciation on capital assets held by the decedent during his or her lifetime would be subject to capital gains taxes. Further, Biden’s tax plan has proposed a long-term capital gains tax increase that could double the capital gains tax rate for wealthy individuals.

Now that the Democratic Party controls both the House and Senate, it is very likely that tax reforms will be made. However, with other pressing issues including COVID-19 and economic relief, many believe that changes to the current tax structure will likely not occur until the end of 2021 and will not go into effect until 2022. As such, this year should provide time to consider making gifts, perhaps recognize capital gains early, or make other adjustments to address the impact these changes could have on your estate plan.

References for additional information:

Biden’s Tax Proposals and Estate Planning (Skadden)

What Does A Biden White House Mean For Estate Planning? (Forbes)

10 Biden Tax Plans (MarketWatch)

Joe Biden’s Tax Plans for the Next Few Years (Kiplinger’s)

2020-2021 Capital Gains Tax Rates - and How to Calculate Your Bill (NerdWallet)

With the end of 2020 in sight, a few last minute estate planning considerations provided by JD Supra can help you close out this turbulent year with confidence and a clean slate:

1. Make gifts of cash to public charities to take advantage of tax laws;

2. Have discussions regarding your estate plan with your family over the holidays;

3. Review and update your estate plan every few years or after a major life event such as a birth, death, or marriage;

4. Check account ownership and beneficiary designations to make sure they still reflect your wishes;

5. Make sure your family knows how you would like your affairs to be handled in the event of your incapacity and where all pertinent documents (powers of attorney, living wills, advance directives, etc.) are stored;

6. Investigate life insurance options for the benefit of your dependents or loved ones; and

7. Finalize or pledge charitable gifts that qualify for 2020 tax purposes.

Wishing you joy and happiness this holiday season, and a safe and bright start to a brand new year!

In the face of a global crisis, I wish you comfort in holding on to what is important and trusting that these times will pass. As uncertainty abounds, please feel free to continue to contact me with any questions or planning needs. Document review and consultations are always free of charge. I will continue to offer free health care powers of attorney and living wills until July 4th, 2020. If you or a loved one need these or any other planning documents, please be assured that I work quickly to deliver documents promptly and coordinate witnessing and notarization.

Through this unsettling time, some have taken the opportunity to pontificate, some to take action, and others to simply tune out the noise and wait for it to end. The beauty lies in the fact that we live in a country where we are free to do as we choose, yet recognizing that the vast majority of Americans are suffering, sacrificing, and doing their individual best for the sake of all. Thank you to all of the helpers across every industry giving it your very best when we need you the most. May we always remember those who choose with humility and courage to stay standing in our corner through our greatest trials refusing, without exception or excuse, to let us fall.

It’s a new year and that means lots of new and exciting things are on the horizon…like gift and estate tax changes! For the year 2020, the federal gift and estate tax exemption will be $11.58 million per person, or $23.16 million for a married couple. This means that each individual may pass up to $11.58 million to his or her heirs without incurring federal gift or estate taxes. So, a married couple may pass up to $23.16 million to their heirs free of federal estate and gift taxes. However, the last surviving spouse must remember to elect to make the predeceased spouse’s unused exemption amount portable when completing the estate tax return for the predeceased spouse. Spouses can pass an unlimited amount of assets to each other free of federal estate and gift taxes through the marital exemption, but the portability election must be made for a surviving spouse to take advantage of the predeceased spouse’s unused exemption amount.

The annual gift exclusion amount will not change this year, staying at $15,000 per person. This means that each individual can give up to $15,000 to as many individuals as they wish without gift tax ramifications. As such, a married couple together can give up to $30,000 this year to children, grandchildren, or other loved ones without incurring gift taxes and without detracting from their lifetime exemptions.

Both Indiana and Ohio remain estate and inheritance tax-free states, so no state level estate and gift taxes will be imposed in these states in 2020.

For more information on federal estate and gift taxes in 2020, check out this article published by Forbes.

While many will be utilizing free time this month to vacation or escape the chaos of the holidays, you may be taking advantage of some time off to work on your New Year’s resolutions. Consider adding an estate plan to your list of goals for the coming year. To get you started, Kiplinger’s recently published a comprehensive list of the ten most common estate planning mistakes. These ten considerations provide a good starting place if you hope to address your estate plan in the year to come.

The top 10 estate planning mistakes according to Kiplinger’s:

1. No “real” plan.

2. Failure to update.

3. No disability/long-term care plan.

4. Disregarding estate tax liability.

5. Improper asset ownership.

6. Lack of liquidity.

7. Overlooking beneficiary income tax implications.

8. Leaving out measures for minor children.

9. Forgetting to consider charitable gifts.

10. Ignoring the impact of beneficiary designations on retirement accounts.

Best wishes for a Merry Christmas and a Happy 2020!

For 2019, the IRS has announced that the lifetime estate and gift tax exemption amount has increased to $11.4 per person, or $22.8 million for a married couple. This means that an individual may pass $11.4 million in assets without facing federal estate taxes. Married couples may still pass assets to each other upon the death of one spouse free of federal estate taxes. The surviving spouse may then elect to utilize the deceased spouse’s exemption amount (called “portability”) which would allow the surviving spouse to pass up to $22.8 million in assets free of federal estate taxes.

The annual gift exclusion amount remains at $15,000 for 2019. This means that each individual can gift up to $15,000 to an unlimited number of individual recipients without cutting into their $11.4 million individual lifetime estate and gift tax exemption allowance .

Check out this 2019 estate tax update from Forbes for more information on 2019 estate taxes.

Wondering where to start as you consider creating an estate plan? Thinking through this short and sweet checklist will give you a solid foundation for your estate plan:

• Beneficiaries: Who will get your assets when you pass away? Friends, family, charities?

• Specific Gifts: Do you have any special items such as family heirlooms or jewelry that you would like certain individuals to receive after you pass away?

• Trustee: Who will manage assets on behalf of your children if you pass away while they are young?

• Executor: Who do you trust to distribute your assets as you have spelled out in your will?

• Financial Representative (POA): Who should make decisions regarding your finances and other personal business if you become incapacitated?

• Health Care Representative (POA): Who should make medical decisions on your behalf if you become incapacitated?

• Living Will: If you are in a terminal state as determined by a physician and unable to make decisions on your own, would you like to receive life-prolonging care, or would you prefer to receive comfort care only?

Best wishes for a safe and happy holiday season to you and your family!

You have surely heard about the new tax legislation signed into law by President Trump at the end of 2017, but what does it mean for your estate plan?  Below are a few key changes to the tax law that can impact estate planning:

• The annual federal gift tax exemption increases to $15,000 this year, to be adjusted for inflation each year thereafter.  This means that each individual can give up to $15,000 in gifts to as many individuals as they would like in 2018 without touching their lifetime exclusion amount.
• The lifetime gift and estate tax exclusion amount increases to $11,200,000 for each individual as of January 1, 2018, and will increase with inflation each year through 2025.  This means that each individual can pass assets worth up to $11,200,000 during life and/or at death without incurring federal gift or estate taxes.
• The lifetime exclusion amount is still portable, meaning a deceased individual's unused portion can be utilized by a spouse.  As such, the exclusion amount for a married couple for 2018 is effectively $22,400,000.
• On January 1, 2026, the lifetime exclusion amount will drop back to the 2017 level ($5,490,000 adjusted for inflation) per individual.
• The federal estate tax rate remains 40% for those who exceed the lifetime exclusion amount.

Wishing you all the best for a happy and healthy 2018!

What is the biggest mistake people make when putting together an estate plan?  We forget that an estate plan should not only be about writing a will to decide who gets our assets when we die, but it should also be, possibly more importantly, about handling our personal affairs while we are still alive in the event of incapacity.

A recent piece in Forbes outlines a concise list of documents to consider creating in addition to a will when setting up your estate plan.  These include:

• Medical Power of Attorney
• Living Will
• Durable Power of Attorney
• Revocable Trust
• HIPAA Release
• Organ Donation Authorization

Don't forget, your estate plan should not just take care of others - it should also take care of you!

Whether you are planning a wedding this year, or you have been married for 50 years, this helpful article from A Practical Wedding outlines four major planning discussions you should have with your spouse.  Writing your wills, purchasing life insurance, preparing living wills, and documenting various aspects of life can go a long way toward making an unexpected situation much simpler for your spouse or other loved ones to manage.

Thank you for a wonderful 2016, and best wishes for a safe and happy 2017!

Welcome to 2016!  If getting your estate plan in order is one of your resolutions for the new year, take a look at this quick list of changes to 2016 estate planning law compiled by financial services company The Motley Fool.  Even if you already have an estate plan in place, it is helpful to understand how these changes could impact your estate plan. 

1. The lifetime exclusion amount, or the amount of assets an individual may pass free of tax during life or after death, increases to $5.45 million in 2016.
    
2. Individuals may give gifts of up to $14,000 to any number of individuals this year before the lifetime exclusion amount even comes into play.
    
3. The federal tax rate for taxable estate assets is 40% this year.
    
4. The lifetime exclusion amount is still portable, meaning spouses can utilize any unused portion of a deceased spouse's lifetime exclusion amount if the proper election is made.  As such, married couples can take advantage of a $10.9 million lifetime exclusion amount this year.
    
5. Both Indiana and Ohio have done away with estate taxes, so state level estate taxes are not a concern for Indiana and Ohio residents this year.

Here's to a safe and happy 2016!

Looking for a last minute gift idea for your family and loved ones this holiday season?  How about putting together an effective estate plan to protect them in the future?  The gift of a solid estate plan can save your family and loved ones time, money, and headaches down the road.  It is important to put in the time now to make sure your affairs are in order as mistakes in your estate plan can have devastating consequences after your death.  A piece on the website Financial Planning highlights ten major celebrity estate planning mistakes to avoid:

• Appointing an untrustworthy trustee or executor
• Failing to clarify intent
• Putting off estate planning until it is too late
• Making verbal promises outside of the plan
• Failing to fund a trust
• Failing to make documents accessible to loved ones
• Creating unenforceable documents
• Failing to update estate planning documents after major life events
• Creating "do it yourself" estate planning documents
• Failure to establish an estate plan at all

Wishing you a happy and safe holiday season and all the best in the new year!

As we begin a new year, I would like to take a moment to thank all of my wonderful clients for their business this past year!  Also, a huge 'Thank you!' to those who have provided word-of-mouth referrals to friends and loved ones.  Like any small business owner, I have the opportunity to do what I love because of the help of these referrals.  I have enjoyed meeting a number of fantastic people, and I look forward to what lies ahead.

Best wishes for a wonderful year, and in the words of Joey Adams, "May all your troubles last as long as your New Years resolutions."  Happy 2015!