IT'S 2019 - HERE'S WHAT YOU NEED TO DO TO PLAN APPROPRIATELY:
1. Reduce Your Estate Taxes and Protect Your Wealth
The federal estate tax exemption as of January 1, 2019 is $11.4 million. This exemption is scheduled to be reduced in 2026 to $5 million (inflation adjusted). If the so-called “blue wave” of 2018 continues through the 2020 elections, the federal estate tax exemption could be changed much earlier than current law requires. A Democratic administration in Washington could push for the $3.5 million exemption that was in place under President Obama and was to continue under Clinton’s plan. Taking obvious actions before then makes good sense, in case the opportunities we have now are no longer available. No one knows how to predict what might happen in Washington. There is a perception that the 2017 Tax Act favored the wealthy unfairly. Often in Washington, tax legislation is subject to wide pendulum swings. Exemptions could be dramatically reduced, so why not use them now to get assets out of your taxable estate? Responsible planning may be structured to reduce your taxable estate, save income taxes and protect your assets from creditors, in a way that permits you to continue to have access to your assets if there are harsh financial reversals. Even if you already have a plan in place, it’s important to revisit your plan to make sure that it still works for you. 2019 should be a planning year. By making discounted gifts using permissible valuation techniques in 2019, you will know well before 2025 if the IRS intends to challenge the values of reported gifts and sales, so that you can continue executing your gifting plan before the exemption is reduced in 2026.
2. Create (or Strengthen) Your Team of Advisors and Collaborate
If you don't have a team, create one. Have them meet and coordinate, so that you can foster a better plan with better coordination and checks and balances. Pulling together your team of planning advisors can reduce the “what ifs,” particularly in an instance of an untimely death or unforeseen illness or disability. You may want to be able to call on a team of people rather than to rely on one person. One of the biggest tragedies, and unnecessary difficulties, is when someone dies or becomes disabled and nobody knows what decisions to make or where to pick up the pieces. Now is the time to collaborate closely with everyone on your planning team: your investment advisor, CPA, insurance advisor, and trusts and estates attorney. Your team should meet as a unit to review the plan in place and strategize to maximize opportunities available under the current laws. Meeting together is crucial, even if by web-conference or conference call, so that your advisors can work together and guide your plan most efficiently and effectively.
3. Create A Secure Digital Vault for Your Estate Planning Documents
Use secure, password-protected cloud servers for sensitive data which you can share with your trusted family and members of your consulting team. This is particularly useful in an emergency. Someone has access to important documents; like your healthcare proxy, for example. Make sure you have copies accessible for those that need copies, such as family advisors, family members, fiduciaries, et cetera, because too often, people have no idea where to locate these items when the time comes. It ends up turning up in a safe or a safe deposit box that becomes costly and complicated to retrieve.
4. Update Your Plan
If you have a trust that's even five years old, you may need a more modern trust which can be drafted to be more powerful, robust, tailored, and flexible. Flexibility is key, because the world keeps changing, as do the stock market and tax laws. Trusts that were set up more than a few years ago are unlikely to provide the robust terms that modern trusts provide, such as a modification provision, having trust protectors who can monitor trustees and make mid-course changes, and more. In an updated directed trust, you can engage a myriad of different provisions. Talk to your team of advisors and see whether you can improve an old trust by decanting it or merging it into a new trust. There's a similar construct called a non-judicial modification. If you have irrevocable trusts that are more than a few years old, review them and assess how to improve them. Oftentimes, the improvements of the administrative provisions can make the trust much more powerful. Often, people will sign an old insurance trust and not look at it for 15 or 20 years. It's highly unlikely that kind of old trust is going to serve the current environment or needs. Examine your trustees and fiduciaries for efficacy and relevance. People in blended families should consider whom to name as trustee to minimize any potential friction between various family members. Evaluate which institutions and family members have a role to play. Too often, people feel a sense of obligation to name a certain family member as a fiduciary. Really consider if that person is the best choice from multiple angles. Look at your Will and the people named in it. Ask yourself if you still trust the named parties and if they possess the integrity to carry out your Will as you intended. Every two or three years, your Will should be revisited for these reasons. Blended families make this review even more pertinent.
Please contact Lara M. Sass, PLLC by phone at (212) 971-9770 or by email at firstname.lastname@example.org if we can assist you in establishing or strengthening your estate plan in 2019.