Estate Planning Update

January, 2020

  1. 2020 Annual Gift Tax Exclusion: remains at $15,000 per donor, per donee.
  2. 2020 Gift and Estate Tax Exclusion: increased to $11,580,000 per donor through 2025, see #8.
  3. Marital Deduction for Transfers to U.S. Spouse: unlimited.
  4. 2020 Generation Skipping Tax Exclusion: increased to $11,580,000 per donor through 2025, see #8.
  5. Top rate for Federal Estate, Gift and Generation Skipping Taxes: 40%.
  6. National Topics: While we were focused on the impeachment hearings last fall, Congress and the President were busy passing the SECURE Act. In addition to funding federal agencies through September, the SECURE Act impacts the structure and administration of retirement plans and became effective January 1, 2020. The most significant change from an estate planning perspective is the reduction of the payout period to 10 years for most beneficiaries, effectively eliminating the so called “stretch out” – spreading out retirement account distributions over their life expectancies. There are exceptions for spouses, minor children, disabled or chronically ill, and individuals less than 10 year younger than the participant. These changes may require you to modify your estate plan. To determine whether your current estate plan needs to be reviewed and updated ask yourself the following questions:
                 Is my trust the designated beneficiary of my retirement account?
                 Is my retirement account a disproportionately large portion of my total net worth?
    If the answer to both of the above questions is yes, you need to contact us immediately because we need to review the impact of the SECURE Act on your trust and estate planning objectives and discuss alternatives. Solutions include spending down the IRA, converting the account to a Roth IRA, naming siblings rather than the trust as beneficiaries, modifying the trust to delay distributions from other assets until after the 10 year period, changing the trust provisions from a conduit trust to an accumulations trust and giving the retirement account to charitable beneficiaries or charitable remainder trusts.
  7.  Arizona Topics: The new LLC Act becomes effective September 1, 2020 for existing limited liability companies. The new law modifies or creates statutory rights regarding information, transferee rights, causes of dissolution, derivative actions and the fiduciary duties of loyalty and care. In certain circumstances, owners of LLCs may want to modify these rights in their operating agreements before the law becomes effective.  For more on the new LLC Act see
  8. Estate Planning Opportunities: On December 31, 2025 the estate tax exclusion is automatically reduced by 50%. Anyone considering large gifts in the next ten years should begin discussing alternatives now while the exclusions are increased. Market and political volatility may take away the planning opportunity that exists today.  This is especially true for estates of married couples with assets over $10,000,000.  Call and schedule an appointment if you want to discuss how you can take advantage of this opportunity.
  9. Quinn News: Quinn just returned from the Heckerling Institute on Estate Planning in Florida with a bag full of ideas and the latest cases, laws and regulations. But after five days of seminars, he was ready to return to work.  Give us a call to see if anything at the seminar is applicable to your estate plan.