In 2020, many people had various parts of their lives changed as a result of the coronavirus pandemic. With the United States presidential election scheduled for November 3 of this year, many of us are about to have our lives changed even more. As we anticipate this event, it is critical to review the terms of your estate plan. After all, estate plans should be reviewed periodically to make sure that the plan is capable of achieving your estate goals in a way that reflects existing laws. If you have not yet written your estate plan but are preparing to do so, you should create your estate plan in consideration of these potential changes. While there is no saying how the election will unfold, you can take the time now to make sure your estate plan accurately reflects any necessary changes.
How the 2020 Election Could Change Things
If the Republican Party prevails in the election, the party has proposed few changes and will instead maintain existing estate planning taxes as they are under the 2017 Tax Cuts and Jobs Acts. In contrast, if the Democratic party prevails in the election, they have proposed several critical changes to existing estate planning taxes, which include:
- Placing a 12.4% social security tax on incomes above $400,000
- Reducing the estate and gift tax exemption to $3.5 million for each beneficiary
- Removing the 20% tax deduction for pass-through business income
- Removing the cost basis step-up after a person’s death
Estate Planning Actions to Consider
In light of the 2020 election, there are some helpful tax planning strategies that you should consider. Some of these strategies include:
- Converting all or some of a traditional IRA to a Roth IRA.
- Deferring deductions into the future when deductions might be more valuable.
- Increasing the income you make in 2020 by either selling stocks with capital gains or selling a business or a piece of real estate to take advantage of current tax rates.
- Reviewing your estate plan to make sure that it has maximum flexibility for any potential change in tax law.
- Gifting assets now if you are concerned about a reduction in estate tax exemptions.
- Creating a “spousal lifetime access trust” in which one spouse funds a trust for the benefit of the surviving spouse for his or her lifetime. While these trusts remove the cost basis step-up at the time of death, the Democrats if elected have proposed eliminating the step-up anyway.
Speak with an Experienced Estate Planning Lawyer
Estate plans are not a once and done process. Instead, it is critical to review estate planning documents around every major life event to determine if any changes need to be made. It is also a good idea to revise estate planning documents when changes to estate planning laws occur. To make these changes, it can help greatly to retain the assistance of an experienced attorney. Contact attorney Jim A Lyon today to schedule a free case evaluation.