It’s Time to Cut Your Taxes: Use Exemptions Now or Pay Later

Tax Advantages for Gift, Trust, and Estate Planning are Waning Quickly

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“Someone’s sitting in the shade today because someone planted a tree a long time ago.” – Warren Buffett


Why Waiting to Plan for Your Estate is a Costly Gamble

Let’s cut to the chase:  It’s a gut punch to hand over your hard-earned money to the IRS in the form of taxes.  On the other hand, some of these decisions around estate planning aren’t always easy – or may even feel too premature for your current age or wealth. 

Enter 2021.  We are currently witnessing the impacts of pandemic relief programs in the form of proposed tax changes (under the Budget Reconciliation bill being considered by Congress right now).  While some of the contentious topics have been removed from the proposed bill already, most experts agree that the tax changes within the bill will likely remain intact.  Here’s the rub:  For those who wait until the bill is passed, it may be too late to capture the last of the tax cuts that are available right now.  KCoe’s Jim Rein, Next Gen tax expert, explains:   

“A portion of the proposed tax changes will accelerate the expiration of estate planning exemptions that we weren’t expecting to sunset for a few years.  Essentially, this means that we’re going to need to do some important calculations and decision-making – before year’s-end – to save you a considerable amount of taxes in the long term.”

Estate Planning Needed Ahead of Major Changes and Expiration

Here are some of the most significant estate tax changes that are proposed within the Reconciliation bill currently: 

  • Elimination of the “doubled” estate tax exemption will reduce lifetime estate and gift tax exemptions (effective January 1, 2022) – taking advantage of this historically high exemption before year-end is critical
  • Increase of the available estate tax special use valuation reduction
  • Elimination of valuation discounts on “passive assets” for contributions of entity interests to trusts – especially crucial for any transfers relying on valuation discounts of entities with passive assets
  • Major changes to treatment of grantor trusts may eliminate benefits of IDITs, GRATs, SLATs – effective the day tax legislation is signed

“The ‘last chance’ for taking advantage of the high estate and gift tax exemptions is right now – because once the Reconciliation bill is passed, they will no longer be available past 2021 and aren’t expected to go this high again ever,” advises Rein.  “The bottom-line financial impacts of not utilizing the current provisions can be quite detrimental to estates, generational wealth, and legacies.”

By exploring tax-savvy strategies now, you can secure the most advantageous long-term financial benefits and estate decisions. 

To request a tax planning discussion, or to read more on KCoe’s tax insights and takeaways, visit:

KCoe’s government and federal affairs team, in conjunction with its Next Gen tax team, will continue to monitor legislative activities and provide updates.  Contact a KCoe estate planning expert to assess your tax strategy and capture all available advantages while you still can.

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