This is definitely a year that will go down in history books for many reasons, especially the pandemic of covid-19. It is also an election year and if current projections ring true there could be a democratic sweep take place in November. If that happens there are some estate planning and tax issues that may need to be considered before the end of 2020.
Keeping in mind that historically the U.S. President and the makeup of Congress show very little bearing on the long-term returns of the capital markets. With that said, a democratic sweep will likely include significant policy changes that will impact estate planning and taxes. Let's take a look at a few opportunities that you may want to consider taking advantage of this year should this occur:
- Section 529 college saving plans allow annual gifts to be front-loaded for the equivalent of 5 years ($75,000 individually or $150,000 per couple). With escalating college costs, this kind of gift could be very beneficial for children or grandchildren who one day hope to pursue a college education.
- As we have discussed before, estate tax exemption thresholds have been relatively high for the last few years and were set to remain that way until 2025. A democratic sweep would likely change that so it may be a good time to maximize these exemption thresholds by the end of 2020. The exemption amount is currently $11,580,000 per individual and $23,160,000 per couple. We could see these amounts shrink considerably and sooner rather than later.
- Take advantage of low IRS lending rates and use intra-family loans as a tax efficient way to transfer wealth.
- Continue to take advantage of the $15,000 per year per person non-taxable gift to beneficiaries. Currently, you can still give an unlimited amount directly to healthcare or educational institutions on behalf of someone else.
- Take advantage of the low interest rate to establish trusts that will benefit beneficiaries or charitable organizations known as GRATs and CLATs.
Discuss any of these strategies with a knowledgeable estate planning attorney. Contact Stouffer Legal in the Greater Baltimore area to set up a consultation to discuss what you may need to do to take advantage of these types of strategies before the end of 2020.