A Dozen Reasons to Review Your Financial and Estate Plans

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Businessman touching manuscript real estate plan projectIn the face of volatile times and uncertainties caused by the COVID-19 pandemic, there are countless reasons to review and update your financial and estate plans now. From opportunities for favorable business valuations in the current economic environment to changes prompted by the SECURE Act, the following list covers several considerations that may merit a review of your financial and estate plans:

  1. The current (but temporary) higher lifetime estate/gift tax exclusion and lower current valuations provide the opportunity to enhance wealth transfer in the near term. Ask yourself the following questions:
    • Will Congress significantly decrease the federal lifetime exclusion?
    • Does your state of domicile currently assess an estate or inheritance tax?
    • With a higher lifetime exclusion, would it be prudent to “undo” certain moves intended to limit estate tax but which result in lost basis step-up?
    • The estate funding formula may predate advent of higher lifetime exclusions and as such, possibly disinherit the surviving spouse.
  2. In this current “down market,” opportunities may exist for tax-favorable valuations of businesses for the gifting or sale of interests to family members.
  3. Historically low interest rates also provide the prospect for “leveraged” gifting (such as Grantor Retained Annuity Trusts (GRATs)), by enabling further reduction of the amount subject to gift tax.
  4. The current low interest rate environment may warrant the revision of intra-family loans (but beware of potential income tax implications to the borrower).
  5. Recent case law has created state tax savings opportunities with respect to trusts that accumulate income.
  6. A stock market decline may prompt individuals to add life insurance as a hedge against diminished legacy. Alternatively, if policy performance (e.g. dividend history) has been positive, policy holders may be able to leverage their existing policy for another with greater death benefit (or lower premium, or both).
  7. The original circumstances for acquiring life insurance may have changed, providing a reason to review the policy and tailor the policy holder’s insurance program to his/her current objectives.
  8. Increased awareness of “Black Swan events” can prompt investors to review their asset allocation.
  9. A stock market decline may justify review of the Roth IRA conversion strategy and present possibilities for more tax-efficient conversion.
  10. The federal SECURE Act creates the need to review estate plans that designate certain trusts as the beneficiary of an IRA (e.g. the SECURE Act made changes to the determination of the annual required minimum distributions).
  11. Business and investment losses may warrant a review of financial independence plans.
  12. Severe economic downturns can stimulate consideration of asset protection strategies.

We encourage you to review your financial and estate plans during this uncertain time. For help updating your plans or establishing a plan, please contact our team.

About our authors

Dave Laske, Partner

Dave Laske, Partner

Dave Laske, CPA, MST, has extensive experience in corporate, partnership and individual taxation. He specializes in tax planning and compliance for closely held businesses, estates, trusts and high-net worth individuals. Dave also performs tax planning for retirement plan accumulations and distributions and structuring of plans for the tax advantageous exercise of executive stock options.

Louis Sands, Partner

Louis Sands, Partner

Louis Sands, JD, CPA, has more than 20 years of experience serving as a trusted tax advisor. Louis excels in managing comprehensive personal and business tax planning needs for a variety of clients, such as professional services, law firms, high net worth individuals and family groups as well as family offices. His specialized knowledge of trusts, pass through entities and private foundations aids in preparing clients, their families and their businesses for the future.

Bill Nortman, Partner

Bill Nortman, Partner

Bill Nortman, CPA, has extensive experience in corporate, partnership, trust and individual income taxation. Over his years of practice, Bill has worked with closely held businesses, trusts and high net worth individuals and their families to meet their goals and objectives.

This publication contains general information only and Sikich is not, by means of this publication, rendering accounting, business, financial, investment, legal, tax, or any other professional advice or services. This publication is not a substitute for such professional advice or services, nor should you use it as a basis for any decision, action or omission that may affect you or your business. Before making any decision, taking any action or omitting an action that may affect you or your business, you should consult a qualified professional advisor. You acknowledge that Sikich shall not be responsible for any loss sustained by you or any person who relies on this publication.

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