Estate Planning

Should you make gifts now?

The estate tax exemption doubled this year and will be $11.4 million next year. This means that you give away that amount (not excluding annual exclusion gifts of $15,000) without paying gift tax. The exemption, though, is scheduled to revert back down to $5 million, adjusted for inflation, in 2026. This back-and-forth thing with the tax exemption has happened a few times in the past.

One of the interesting things about a reduction in the exemption is whether you could use the current exemption by making big gifts and not be harmed or taxed when the exemption goes down. It would seem logical that if you followed the rules, you should not have any problems. Unfortunately, we are talking about the tax code – where logic does not apply!

Thankfully, the US Treasury and IRS have issued proposed regulations that confirm that large gifts today won’t be somehow attacked in the future, assuming the exemption does indeed go back down.  Interesting in reading the proposed regulations? You can do so here.

IRS issues updated limits for retirement plan savings

Check out the release here.

The skinny:

  1.   401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan is increased from $18,500 to $19,000
  2.   IRA contributions increased from $5,500 to $6,000, plus $1,000 catch-up contributions for individuals over age 50.

Who is on your team?

When I meet a new client, I like to ask who her advisors are – accountant, insurance agent and financial advisor. Why? Because that’s who makes up that client’s team. Teams can work wonders for clients, which reminds me of a song from a show my girls watched a long time ago:

Here are some reasons I like teamwork:

  • Advisors know a lot about their clients. Sometimes clients don’t share enough information for me to give good advice.
  • Advisors are trained differently. That results in different ideas and/or perspectives that get better and more customized solutions for our clients.
  • We can learn from each other, which benefits current and future clients. I surely do not know everything, so I am happy to learn something new from others!
  • Planning will be coordinated. What good is a Trust that is intended to hold life insurance if the insurance beneficiary form is not updated?

By the way, you are welcome for the song – I hope that you are signing it all day!  🙂