Current Tax and Estate Planning Considerations – Fall 2024

Now is a good time to think about future planning considerations. Why now? The current laws and tax policy are known and there are upcoming and expected changes that could have a profound impact on generational wealth transfer and tax planning. Planning before being forced to plan is the most effective way to plan. This outline is a tool to use with your tax and estate advisors. The timing is important.

High interest rates that are heading lower

After a decade of near zero interest rates, today’s interest rates have normalized. The recent increase in rates brings into play several important planning considerations. It’s also a good idea to prepare now for techniques that can be implemented in lower interest rate environments.

Planning tactics to consider:

1. Techniques that may work best in higher interest rate in environments:
   a. Qualified Personal Residence Trusts (QPRTs)
   b. Charitable Remainder Trusts (CRTs)
2. Techniques that may work best in lower interest rate environments:
   a. Grantor Retained Annuity Trusts (GRATs)
   b. Charitable Lead Trusts (CLTs)
   c. Inter-family loans

High income tax (federal and state)

Large government debt and deficits may lead to higher taxes. While unknowable, future tax rates may increase and/or future deductions decline.

Planning tactics to consider:

1. 529 funding, super funding
2. Setting up trusts in no-income tax state
3. Charitable giving of all kinds, including split interest charitable trusts (CRTs and CLTs)
4. Donor Advised Funds
5. Business owners – taking advantage of prepaying state income taxes (PTET)
6. Qualified charitable distributions (QCDs) from retirement accounts

High income taxes (federal and state)

Large government debt and deficits may lead to higher taxes. While unknowable, future tax rates may increase and/or future deductions decline.

Planning tactics to consider:

1. 529 funding, super funding
2. Set up trusts in no-income tax states
3. Charitable giving of all kinds, including split interest charitable trusts (CRTs and CLTs)
4. Donor Advised Funds
5. Business owners – take advantage of prepaying state income taxes (PTET)
6. QCD’s – Qualified Charitable Distributions from retirement accounts
7. Roth Conversions
8. Retirement Cash Flow Planning – draw money out of qualified accounts to pay taxes at lower rates today.
9. Fund Tax-free (Roth) accounts over Tax-Deferred (Traditional IRAs)

Sunsetting gift and estate tax exemptions

In 2026, the current estate tax laws sunsets. While that could change or be extended, any change would likely be a last-minute law, meaning most individuals will not have time to do optimal planning. 2024 election results will be informative.

Planning tactics to consider:

1. Wealth transfer techniques that reduce your taxable estate but provide indirect access and control
   a. Grantor Trusts, specifically Spousal Lifetime Access Trusts (SLATs)
2. Taking advantage of basic gifting techniques
   a. Annual gift exclusion maximization
   b. Direct payment of education tuition expenses for family members
   c. 529 planning for family
3. Charitable giving techniques
   a. Donor advised funds
   b. Family foundations
   c. Make charities the beneficiaries of retirement assets

Shifting retirement legislation

Recent legislation includes the SECURE Act, the SECURE 2.0 Act, and changes to earnings limits on catch-up contributions. Current and proposed legislation can be confusing and is often in flux.

Planning tactics to consider:

1. Regular review of beneficiary designations on retirement plans, IRAs, life insurance and annuities
2. Charitable giving – Replacing taxable RMDs with QCDs
3. Roth conversions
4. Excess distributions over RMD amounts when in lower marginal tax brackets

The information contained in this summary is for informational purposes only and any opinions expressed are current only as of the time made and are subject to change without notice. The information provided is not intended to be, and should not be construed as, investment, legal or tax advice. Any investment advice provided by LVW Advisors is client specific based on each clients’ risk tolerance and investment objectives. This commentary is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.