Kicking off the new year, Estate Planning Attorney Brandon Grysko has determined some factors that should enter your mind during the estate planning process. One of the first things we are going to mention is COVID-19, we guarantee you’ve heard about it on the news, radio, even on your social media. But did you know COVID-19 also has an impact on estate planning?

Consider Planning Early

One of the major lessons we have learned from the COVID-19 pandemic so far is to make sure you begin the planning process early in the year and while still healthy.

In frequent instances, prospective or current clients will reach out to start an estate plan once they or their loved one is in a nursing or rehab facility. This is problematic, even with the inclusion of laws and orders governing remote-signing or witnessing of estate planning documents.

The reason being a lot of people that are disabled aren’t able to take full advantage of remote technologies. For example, a client may be hard of hearing, which makes it difficult to communicate effectively on a system like Zoom.

This highlights the importance of completing your estate plan while you are still healthy and capable to do so.

New Administration Impacts on Estate Planning

As we have a new Presidential Administration set to take office on January 20th, there are some tax-policy changes that could affect the estate planning process. One example is a proposed reduction in Estate Tax Exemptions. When you die, your estate is not subject to the federal estate tax if the value of your estate is less than the exemption amount.

Currently, that exemption is $11.7 million, so most individuals planning their estates aren’t impacted by any type of federal estate tax issues. But the idea has been floated around that exemption could be reduced to the pre-Tax Cuts and Jobs Act of 2017 amount which would be $5.49 million. Additional proposals include reductions in gift-tax amounts, even the elimination of a “step-up in basis”.

Over the last couple of years, we have often discussed taxes and tax impacts on estate planning for the wealthy, individuals with estates valued higher than the $11.5 million thresholds. But if these changes are enacted, they could severely impact the estate planning process for the middle-class, so it’s important to keep an eye on this. Also, as new developments emerge, consult a knowledgeable estate planning attorney that can assist you with navigating the transition of your assets.

Effects of the Secure Act

The Secure Act went into effect in January 2020, so we are past the one-year mark of its policy. The most significant impact it has had is on 401(k)’s, IRA’s, and similar retirement investment vehicles.

For many middle-class individuals and families, a lot of their assets are significantly held in real estate such as their personal residence or maybe a second home. Another significant investment we usually see is 401k, Roth IRA’s, or other deferred compensation.

The Secure Act heavily impacted how 401(k)’s, IRA’s, and other similar investment vehicles transition to the next generation. As it relates to your current investment vehicles, when you pass away typically you will have a designated beneficiary, if that is your spouse, then that spouse can take advantage of a “Stretch IRA”.

The ‘stretch’ aspect allows the 401(k) or IRA to annuitize over the life expectancy of the beneficiary. In past, this was the case with any recipient, they were able to stretch those income tax savings over the course of their expected lifetime as determined.

However, what the Secure Act did was if you’re not a spousal beneficiary or any other special type of designated qualified recipient, then what you receive is a maximum 10-year stretch period.

Inheritors will receive a 10-year max of income tax savings, once the period is up they must withdraw the entire amount of the 401(k) or IRA. Now because it’s tax-deferred money, the recipient must pay income tax on the total withdrawn sum.

Estate Planning Lawyer | Fausone & Grysko, PLC

These are a few things individuals and married couples planning their estates need to keep in mind for the future. We also recommend contacting an estate planning attorney before beginning the planning process. You will receive expert guidance and peace of mind that your assets and family are taken care of.

Start your new year on the right foot, contact Attorney Brandon Grysko today at Fausone & Grysko, PLC to discuss your planning goals and objectives. Brandon can be reached by email or by phone at  248-380-0000.