Don’t Let The Sun Set on Your Estate Plan

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General  |  February 14, 2020  |  
Alex Clendennen

2020: A big year. Tokyo will host the Summer Olympics. NASA will launch a mission to Mars. And the presidential election will take place on November 3rd.

Election Day may seem far off at the moment, but as we stride deeper into February, it’s prudent to reflect on the close relationship between presidential politics, policy changes, and your estate planning.

As you may recall, prior to the 2016 presidential election, there was a flurry of activity in anticipation of possible changes to the tax code. At the time, presidential hopeful Hilary Clinton was threatening to raise the estate tax to 65% and lower the ceiling for estate-tax exemptions. These campaign proposals drove high traffic to estate planning attorneys, as individuals rushed to protect assets before such laws could be implemented. 

Given that precedent, and in order to avoid the stress of last-minute changes to your estate-planning documents, we suggest putting your financial house in order now, while you have time to be deliberate and purposeful in your planning.

Each family’s situation is unique, with its own complexities and dynamics. That being said, there are strategies and best practices in a planner’s toolkit that can help you capitalize on the advantageous estate planning environment that we currently enjoy. 

The biggest opportunity for high-net-worth individuals is the ability to gift up to $11.4mm to another person free of transfer tax. This exemption is more than twice what it was in 2016 ($5.5mm) and is due to sunset in 2026. Of course, given the variability of politics, this provision may be altered sooner than 2026, depending on the political outcomes of the 2020 elections. 

For individuals who have estates between $10mm and $20mm, taking advantage of the current laws could provide a substantial reduction in estate-tax liability. Selection of an appropriate strategy depends on whether a person or family is looking to maintain access to the assets they are removing from their taxable estate, or whether they intend to transfer those assets to children and/or grandchildren. 

Strategies that allow a person to benefit from assets & appreciation that are removed from the taxable estate:

  1. Spousal Lifetime Access Trust (SLAT)
  2. Beneficiary Defective Inheritor’s Trust (BDIT)

Strategies that transfer assets & appreciation to future generations:

  1. Grantor Retained Annuity Trust (GRAT)
  2. Outright gifts of assets, interest in family partnerships, or insurance policies 

Strategies that benefit charitable interests while also benefiting grantors or heirs:

  1. Charitable Lead Trust (CLT)
  2. Charitable Remainder Trust (CRT) 

Each of these strategies has nuances that should be examined carefully in consultation with an estate planning attorney before being implemented. While the present opportunity for significant estate and gift-tax savings is substantial, careful planning is required to ensure that each family’s objectives are supported by the wealth-transfer vehicle they employ.

As the year unfolds, and you witness the lighting of the Olympic torch, the blast-off of the Mars Mission, and other notable milestones, you would like to be able to greet the election news on November 3rd with the satisfaction that, whatever the presidential outcome, you have taken proactive steps to preserve assets and advance the legacy you envision for yourself and your loved ones.

About Venturi Private Wealth

Venturi’s core mission is to help organize, plan, and manage all aspects of wealth for families and entrepreneurs with substantial assets so they can focus on their personal and professional priorities. We manage more than $1.25 billion in assets, a significant portion in-house, often eliminating additional layers of management fees. Founded in Austin, Texas, we incorporate the city’s entrepreneurial energy into everything we do.

 For more information, please reach out to us at info@venturiwealth.com or (512) 220-2035.  


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