Now is the time to review estate plans for 2020. The beginning of the year is a time when many people have a resolution to evaluate, reevaluate, or plan their estate for the first time. With the turn of the calendar below are a few items of note which can affect planning an estate in 2020. Here are three things to consider as you engage with clients in this important conversation.
1. SECURE Act
Effective January 1, 2020, the SECURE Act changes the age of required minimum distributions (RMDs) to age 72 and, in effect, eliminates the “Stretch-IRA” strategy for inherited IRAs. One adjustment advisors may consider is to designate a charity as a beneficiary of an IRA. This change could lead to additional planning conversations of using life insurance or other bequests to children and heirs. Additionally, the “new stretch-IRA” strategy involves using a charitable remainder trust.
2. Tax Cuts and Jobs Act
In late December 2017, President Trump signed the “Tax Cuts and Jobs Act of 2017” (TCJA) into law. This was the first significant tax reform since 1986 and effectively doubled the estate tax exemption. However, these exemptions will expire in 2025, at which point the exemption amounts will revert to their previous levels before the TCJA. This means that until 2025 (unless Congress extends or clarifies), clients should be able to give away more of their estate to heirs while paying less in estate and gift taxes.
3. 2020 Election
Regardless of political affiliation, analysts predict that the upcoming election could have adverse effects on the markets. Over the past three years (really over the past decade), markets have performed exceptionally well. Review clients’ estate plan and investment portfolio before the election and again in July after the Democrat nominee is announced. Since there is much uncertainty about the outcome of the 2020 election, your clients may appreciate additional attention to their investment portfolios around these political events.
While we are still early in 2020, ensure your clients that there is great benefit in planning ahead and revising as you go along. You do not have to wait until International Be Kind to Lawyers Day (April 14th) or National Financial Planning Month (October) to start bringing up these conversations. Start today!