Making Cents: 2020 Estate moves to make now
By: John P. Napolitano, CFP®, CPA, PFS, MST
As the fourth quarter rolls on, there are financial moves that you may consider making in 2020 that may add up to significant estate tax savings in the long run. While this issue is a bit political, nevertheless, it’s an issue and it would be irresponsible for families in my home state of MA with net worth greater than $2 million to ignore. Your net worth for death tax purposes may include any life insurance or other assets that may mature upon your death along with everything else you own.
The current federal death tax threshold is $11.58 million per decedent. The threshold in MA drops to $1 million. A married couple would each get their full exemption if they passed in 2020. That is also the maximum lifetime gift limit, meaning that any US citizen individual can gift up to $11.58 million during their lifetime. We know that you can give $15,000 per year to anyone, but most don’t realize that you can use your full death tax exclusion of $11.58 million while living.
This is a political issue in that no one knows who will occupy the White House, House of Representatives or Senate come January. Some configurations are likely to change the tax code, for better or worse, and the current estate tax limit has a bull’s eye on its back. Should the exemption drop below the current levels next year, you’ll look like a hero in the eyes of the taxing authorities by making large gifts now.
There are sophisticated trusts and entities where you can make gifts and still have some sort of access to the assets, whether it be the income from those assets or through a trust established for a spouse. The scope of these types of entities is too vast for this space, and is something that needs to be discussed with a qualified planning team that includes estate planning specialists.
You can fund these trusts with any asset you want. If your estate is purely liquid, use cash. But most of the people looking to utilize their unified credit during their lifetime are those with valuable illiquid assets, such as real estate interests and business interests.
To make these moves takes time. You may need a few planning sessions to map out, and then the team to help execute on the plan. This should include tax forecasts, document drafting and actually making sure that the correct assets are properly gifted with h change of ownership properly documented.
And what if there is no change in the death tax code, is all this work for naught? I’d argue not for those who are truly gifting assets that they will not need to maintain their desired lifestyle. A good estate plan that is designed to minimize death taxes on the next generation is always good planning. For those on the fence, you may consider establishing the documents and deciding how much funding goes into the trusts after we have clarity on future laws.
This information is not intended to be a substitute for individualized legal advice.
John Napolitano, US Financial Advisors, US Wealth Management and LPL Financial do not provide legal advice or services. Please consult your legal advisor regarding your specific situation.
John P. Napolitano CFP®, CPA is CEO of U. S. Wealth Management in Braintree, MA. Visit JohnPNapolitano on LinkedIn or uswealthnapolitano.com. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. John Napolitano is a registered principal with and securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through US Financial Advisors, a Registered Investment Advisor. US Financial Advisors and US Wealth Management are separate entities from LPL Financial. He can be reached at 781-849-9200.