Preservation | Family Wealth Protection & Planning

Wolters Kluwer has released projected 2022 figures for the gift tax annual exclusion amount as well as the estate and gift tax lifetime exemption amount. These figures were determined by Wolters Kluwer using formulas contained in the Internal Revenue Code. They are based on the increase in the Chained Consumer Price Index for All Urban Consumers (C-CPI-U) for the 12-month period that ended August 31, 2021.

On September 28, 2021, the House Budget Committee released a report that provides explanations with respect to certain provisions included in the proposed House bill called the Build Back Better Act (the “Report”).

On Monday, September 13, 2021, the House Ways and Means Committee released the text for proposed tax changes to be incorporated in a budget reconciliation bill called the Build Back Better Act (the “Act”). The 881-page text includes several significant changes to income and transfer taxes that could drastically change estate, gift and individual income tax planning if made into law.

In Congress’ ongoing fight against fraud, corruption, terrorism financing and money laundering, lawmakers passed the Corporate Transparency Act (CTA) on January 1, 2021, as part of the 2021 National Defense Authorization Act. The CTA contains significant new federal reporting obligations and imposes heavy civil fines and criminal penalties for noncompliance. It may have an especially onerous impact on estate planning clients who accomplish their planning goals through the use of one or more business entities.

How many times have you prepared your income tax returns for the previous year, only wishing you knew then what you know now, so you could go back and make more advantageous tax decisions?  In most cases, you are stuck with the decisions you made before the new tax year began, even though you may not have all the relevant tax information available to assist with those decisions until several months into the new tax year.  Too bad for you, says the IRS, unless you are an estate or trust.

Now that the new year has arrived, it is a good time to catch up on the latest tax rates for estate and trust income tax brackets and exemption amounts for estate, gift and generation-skipping transfer (GST) taxes in 2021. The Internal Revenue Service adjusts these figures annually for cost-of-living increases.

In 2020, the estate/gift and generation-skipping (GST) transfer tax exemptions are each $11.58 million per person, and the tax rate for each is 40 percent. These exemptions will be reduced to $5 million (indexed for inflation) on Jan. 1, 2026, assuming Congress does not change the exemptions sooner.

For the parents of students entering college this fall, there are some unique challenges in store. In navigating all the changes related to the pandemic’s effect on college students, it’s possible you are missing one of the most important items: Having your child sign durable powers of attorney.

This is the fourth in a four-part blog series on the Setting Every Community Up for Retirement Enhancement Act (SECURE Act). The first three installments can be read here.

An area of estate planning that is impacted by the changes in the recently enacted SECURE Act is the use of qualified charitable distributions (“QCDs”). A QCD is a distribution from an IRA (up to $100,000 per year, per individual) made directly to an eligible charity.

Those 70½ and older may continue to make QCDs to public charities. A QCD will count toward an individual’s RMD requirement and generally will not trigger an income tax on distribution. While the age to begin taking RMDs was raised to 72 under the SECURE Act, the age to make QCDs remains unchanged at 70½. Because QCDs are not included in income, they are typically more tax-efficient than taking a charitable deduction.

This is the third in a four-part blog series on the Setting Every Community Up for Retirement Enhancement Act (SECURE Act). Parts 1 and 2 can be read here. The final installment will cover how the SECURE Act affects Qualified Charitable Deductions.

As discussed in previous installments of this blog series, after the death of a retirement plan participant or IRA owner, non-eligible designated beneficiaries of a retirement account (other than a Roth) will experience an acceleration of taxable income and the loss of tax-deferred growth that was available before the recently enacted SECURE Act. This is due to the elimination of the life expectancy, or stretch, payout. If it is important to you to minimize the additional future income tax caused by the 10-year payout, there are several items worth considering.