Current Tax and Estate Planning Considerations – Fall 2023

By Joseph Zappia, Principal, Co-Chief Investment Officer

Because of shifting retirement legislation, including SECURE Act 1.0 and SECURE Act 2.0, current and proposed regulations are confusing and will likely change going forward.

Now is a good time to think about future planning considerations. Why now? The current laws and tax policies are known, and the anticipated upcoming changes could have a profound impact on generational wealth transfer and tax planning. Preparing now, prior to being forced to plan, is important. The guide below is a tool that clients can use in their discussions with their advisor at LVW, as well as with tax and estate advisors. The timing of these discussions is important.

Depressed markets and lower asset values

Most asset values are lower today than 20 months ago.

Planning tactics to consider:

1. Roth Conversions
2. Annual exclusion gifting
3. Wealth transfer strategies that move future appreciation out of estate
4. Unwind failed Grantor Retained Annuity Trust (GRATs)

High interest rates that may head 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. Now is the time to prepare for a lower interest rate environment.

Planning tactics to consider:

1. Techniques that may work best in higher interest rate in environments:
   a. QPRT’s – Qualified Personal Residence Trusts
   b. CRT’s – Charitable Remainder Trusts
2. Techniques that may work best in lower interest rate environments:
   a. GRATs – Grantor Retained Annuity Trust
   b. CLT’s – Charitable Lead trusts
   c. Inter-family loans

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 it could change or be extended, the decision will be communicated with little time for individuals to do optimal planning.

Planning tactics to consider:

1. Wealth transfer techniques that reduce your taxable estate but provide indirect access and controla. Grantor Trusts, specifically SLAT’s – Spousal Lifetime Access Trusts
2. Take advantage of basic gifting techniquesa.
   a. Annual gift exclusion maximizationb. Direct payment of education tuition expenses or medical expenses for family members

   c. 529 planning for family

3. Charitable giving techniquesa.
   a. Donor advised fundsb. Family foundations

   c. Designate charities as beneficiaries of retirement accounts

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.