Health & Wellness

MONEY & FINANCE

MONEY SENSE

Fall AND CHANGE IS IN THE AIR is here

I am writing this article in August while there is still uncertainty on tax law changes and spending bills in congress. I am hoping that by the time this article comes out we may have a much better understanding of what the new tax world will look like. Then we can determine if there are moves that you can make by the end of the year to protect yourself and your family from paying too much in tax now and in the future. Some of the changes may be retroactive to earlier this year and if that is the case, there may not be much that you can do. Hopefully, that will not be the case. However, retroactive changes have happened in the past, so it is not out of the question.

Hopefully any changes that come about will be effective next year so you will still have time to plan with your advisors. If any tax laws get passed, I would suggest you make an appointment with your CPA, estate lawyer and financial advisor to determine how the changes may impact your financial situation. If capital gains rates jump to 40.8%, you may want to look at selling some stocks, mutual funds and real estate. If you have investments that have lost money, you may want to harvest these losses to offset gains when you sell appreciated assets. I would suggest you review your nonretirement investments and look at the cost basis of everything and see if you can offset gains with losses to minimize the impact of cleaning up your portfolio.

Some of the changes may not only impact your current taxes on your income and your investments, they may possibly impact your estate planning strategies. Currently the amount that you individually can have in your estate without any federal estate taxes is $11.7 million and for a couple that amount is $23.4 million. That amount will sunset in 2026 to $5.7 million for an individual and $11.4 million for a couple. Most states have some type of inheritance taxes that may have a lower limit. There is talk about reducing the federal estate limit substantially. The figures have been all over the place and I don’t want to speculate what the results will be, but there is a lot of momentum to lower the amount of the federal estate tax exclusion substantially. If those changes happen, many people that didn’t have to worry about estate taxes may find themselves in a taxable estate situation and therefore they should look at getting some estate planning done to minimize their potential tax burden. Once the changes are announced or we have a better handle on what the changes will be, I would suggest setting up a meeting with your estate lawyer to see if you need to make any changes to your estate plan. There may be some trusts and other strategies that could possibly help you plan and reduce estate taxes for you and your loved ones.

The purpose of this article is to alert you that there are likely changes coming to the tax and estate laws in this country. The proposed changes are all over the map and they may or may not happen as they are proposed. The political and law-making process make this anybody’s guess as to what the final outcome will be. You need to be aware that when the changes happen, you should be contacting your legal, tax and financial advisors to determine if you need to make changes to your current financial strategies. There may be some changes that are easy to make and some that are not so easy to make. Please feel free to email me if you need to discuss your particular situation and if you need a reference to a CPA or estate lawyer, my email is marcs@equityplanning.com. I would recommend watching the news and keeping an eye out for articles and any updates on tax law changes to try to put yourself and your family in the best possible position in navigating the changes that get approved on Capitol Hill.

This piece is not intended to provide specific legal, tax, or other professional advice. For a comprehensive review of your personal situation, always consult with a tax or legal advisor.

Equity Planning Inc. 7910 Woodmont Ave., Suite 900, Bethesda, MD 20814

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