Reasons to Review Your Estate Plan in 2020

Several facets of estate planning law have made this an excellent time to create a powerful estate plan. After all, low-interest rates and high exemption thresholds for things like estate taxes and lifetime gives have allowed more people to pass on wealth in a powerful way. Congress also passed legislation at the end of 2019 that substantially changes estate planning for retirement accounts. Due to these and several other factors, it is worth reviewing the terms of your estate plan this year. This article discusses just some of the things you should consider when reviewing your estate plan in 2020.


# 1 – Low-Interest Rates Make Some Transactions Ideal


Interest rates are currently lows, which offers many estate planning advantages for families with high net worths. So far in 2020, the Internal Revenue Service imposes minimum interest rates between 1.6% to 2.07% based on the type of transaction involved. 


Now is an ideal time for families to consider various estate planning strategies like sales to intentionally defective grantor trusts and implementing grantor retained annuity trusts. Intentionally defective grantor (IDGT) trusts are utilized to reduce estate taxes. A person creates the IDGT, transfers assets into the trust, but retains the ability to reacquire the assets by substituting other property of equivalent value. A grantor retained annuity trust (GRAT) refers to an irrevocable trust into which the grantor transfers assets and receives payments of a fixed amount for a specific term. At the end of the trust, any assets still in the trust pass to the designated beneficiaries without taxes being paid. 


# 2 – The Tax Cuts and Jobs Act Has Temporarily Doubled Exemptions


Becoming effective on January 1, 2018, the Tax Cuts and Jobs Act temporarily doubled the estate, gift, and generation-skipping transfer tax exemptions to $10 million. These exemptions will expire on January 1, 2026. On this date, estate, gifts, and generation-skipping transfer tax exemptions will return to $5 million. 


Additionally, the Internal Revenue Service recently issued regulations stating that gifts made using these increased exemptions will not be subject to estate or gift taxes when these limits lower. Now is the time to consider taking advantage of these exemptions.


# 3 – The Secure Act Changed Retirement Accounts


Towards the end of 2019, Congress passed the SECURE Act, which resulted in several changes regarding how retirement accounts are treated. Most notably, the SECURE Act eliminated “stretch inherited retirement accounts (IRAs)”. Stretch IRAs could previously be distributed throughout a beneficiary’s life. Under new regulations, however, inherited retirement accounts must be distributed within 10 years of the account owner’s death. Existing regulations, however, still allow an individual to roll over or stretch inherited retirement accounts.


Speak with a Skilled Estate Planning Attorney


It is a good idea to review your estate plan given these and other factors. If you need assistance making sure that you take full advantage of the various available tax savings, contact a skilled attorney at Ettinger Estate Planning.

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