Staying Ahead of Estate Tax Laws: Tips for Strategic Planning

Estate planning is a critical component of managing one's wealth, as it ensures that an individual's assets are distributed according to their wishes upon their death. However, the impact of estate taxes can significantly reduce the value of an individual's estate. Proper estate planning can help mitigate potential estate tax liabilities and protect an individual's assets, ensuring that their loved ones receive the maximum benefit possible.

One of the most current estate planning topics today surrounds The Tax Cuts and Jobs Act (TCJA) of 2017.  This act doubled the lifetime estate tax exemption for individuals to $12.92M for 2023 and for married couples to $25.84M. On 1/1/2026  these exemptions will revert to pre-TCJA levels of $5M (indexed for inflation) exposing many more estates to a considerable tax.  The efforts to modify estate tax laws are ongoing, with some proposing to increase estate tax rates and lower exemption thresholds. Staying informed about these developments will allow appropriate adjustments to estate plans.

There are three primary planning opportunities for impacted clients to consider now considering potential changes to estate tax laws:

• Consider gifting now. Utilizing all or a portion of the exemption before the sunset date can help mitigate potential estate tax liabilities. In addition, individuals are allowed to give away a certain amount of assets each year tax-free. This annual exclusion for 2023 amount is set at $17,000 for individuals and $34,000 for married couples.
• Consider charitable donations that can reduce an individual's taxable estate.
• Having trusts in place now can allow for planning and proper execution before the potential changes to estate tax laws take effect. This can help ensure that assets are distributed according to an individual's wishes and minimize potential estate tax liabilities.
• Life Insurance: High-income earners may find the income tax benefits of life insurance more attractive than ever. This can be a valuable tool in estate planning, providing liquidity and tax-efficient wealth transfer options that allows for flexibility if Congress does not act to make the current estate tax exemptions permanent.

By working with an experienced estate planning professional, individuals and couples can develop a comprehensive plan that considers specific needs, goals, and potential estate tax liabilities.

The information provided is general and educational in nature and should not be construed as personalized investment, tax, or insurance advice. You should consult with your own tax or insurance advisor regarding your personal situation. The statements contained herein are based solely upon the opinions of Telemus Capital, LLC. All opinions and views constitute our judgments as of the date of writing and are subject to change at any time without notice. Information was obtained from third party sources, which we believe to be reliable, however Telemus Capital cannot guarantee the accuracy or completeness of such information, and certain information presented here may have been condensed or summarized from its original source. PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. Insurance and investment decisions should always be made based on the client’s specific financial needs, goals and objectives, time horizon and risk tolerance. Current and future portfolio holdings are subject to risk. Risks may include interest-rate risk, market risk, inflation risk, deflation risk, currency risk, reinvestment risk, business risk, liquidity risk, financial risk and cybersecurity risk. These risks are more fully described in Telemus Capital’s Firm Brochure (Part 2A of Form ADV), which is available upon request. Telemus Capital does not guarantee the results of any investments. Investment, insurance and annuity products are not FDIC insured, are not bank guaranteed, and may lose value. Advisory and Insurance services are only offered to clients or prospective clients where Telemus Capital and its representatives are properly licensed or exempt from licensure. No advice may be rendered by Telemus Capital unless a client service agreement is in place.