Estate Planning Implications to Act on Now

Estate Planning Implications to Act on Now

October 29, 2020

Time may be running out for high-net-worth families looking to implement advantageous estate planning strategies under current U.S. tax law as of the date of this article. We continue to see historically low interest rates1 and enjoy what many consider high gift and generation skipping transfer tax exemptions; however, interest rates, in our opinion, will likely increase over time and under current tax law, some exemptions will be automatically reduced by 50% at the end of 2025.2 That said, if there is a swing in the White House and Congress, changes could be enacted sooner, thus triggering the quick end to numerous planning techniques and hasten the repeal of certain tax laws. In addition, here in California and other states, we have recently seen serious discussion about increased income tax rates and a potential wealth tax.3

If you are a member of a high-net-worth family, you probably don’t need to be reminded that potential changes to estate exemptions could be coming. Given the various changes in the tax laws that have occurred within the past 10 years (for example: the advent of the portability of exemption between spouses, the Tax Cuts and Jobs Act of 2017 and the SECURE Act), your family may benefit now from a careful review of your estate and wealth transfer plans. 

Some of the timely topics that are important to review at this juncture include:

  • Utilizing any remaining gift and estate tax exemptions before they reset at the end of 2025 or are potentially lowered by future tax legislation;
  • Taking advantage of historically low interest rates by establishing family loans, refinancing existing loans, or planning for estate tax reducing trusts such as Grantor Retained Annuity Trusts (GRATs) and income producing charitable trusts such as Charitable Remainder Trusts and Charitable Lead Trusts;
  • Evaluating state residency decisions;
  • Reviewing existing plans to ensure they are structured optimally under current law;
  • Planning around the SECURE Act’s 10-year limit on retirement benefits transferred to non-spouse beneficiaries.

So, regardless of the outcome of the current election, we believe there is and will continue to be ongoing uncertainty in estate planning. We believe this is an important time to consider changes to your estate plans as proactively planning now can help minimize any negative impact on your family. If you need an estate planning resource, don’t hesitate to contact us. With almost 40 years (founded in 1982) as a wealth management firm, Sand Hill has established a broad network of highly competent resources, including our co-authors on this article. Finally, look for our upcoming commentary about strategic tax and estate planning strategies you may want to consider following the election. 

Co-Authored by Susan von Herrmann, Christopher Sigmund and Barry Taylor

Susan von Herrmann is a partner with the San Francisco office of Perkins Coie, focusing on Trust & Estate Planning and Family Office Services. Christopher Sigmund is Counsel in the Dallas office of Perkins Coie, specializing in Tax Controversy matters as well as Trust & Estate Planning. Barry Taylor is a Senior Wealth Manager and Managing Director with Sand Hill Global Advisors.

1 – Per the IRS, the October long term applicable federal rate (minimum rate that can be used for intra-family transfers when required repayment is more than 9 years out) is 1.12%; the mid-term rate (for lending terms of more than 3 years but not more than 9) is 0.38%.
2 – Tax Cuts and Jobs Act of 2017
3 – Per Forbes 8/17/2020 Article: “California Legislators Propose 0.4% Wealth Tax, Plus 16.8% Income Tax Rate”
Source: Internal Revenue Service

Articles and Commentary

Information provided in written articles are for informational purposes only and should not be considered investment advice. There is a risk of loss from investments in securities, including the risk of loss of principal. The information contained herein reflects Sand Hill Global Advisors' (“SHGA”) views as of the date of publication. Such views are subject to change at any time without notice due to changes in market or economic conditions and may not necessarily come to pass. SHGA does not provide tax or legal advice. To the extent that any material herein concerns tax or legal matters, such information is not intended to be solely relied upon nor used for the purpose of making tax and/or legal decisions without first seeking independent advice from a tax and/or legal professional. SHGA has obtained the information provided herein from various third party sources believed to be reliable but such information is not guaranteed. Certain links in this site connect to other websites maintained by third parties over whom SHGA has no control. SHGA makes no representations as to the accuracy or any other aspect of information contained in other Web Sites. Any forward looking statements or forecasts are based on assumptions and actual results are expected to vary from any such statements or forecasts. No reliance should be placed on any such statements or forecasts when making any investment decision. SHGA is not responsible for the consequences of any decisions or actions taken as a result of information provided in this presentation and does not warrant or guarantee the accuracy or completeness of this information. No part of this material may be (i) copied, photocopied, or duplicated in any form, by any means, or (ii) redistributed without the prior written consent of SHGA.

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