As we step into the new year, resolutions and plans are in the air. January, however, brings changes to the wealth planning landscape. The Tax Cuts and Jobs Act of 2017 is set to expire in 2025, impacting tax rates and exemptions. The Secure 2.0 Act adds another layer of potential change.
Amidst this uncertainty, seizing the current window of opportunity is crucial. Here are key issues to discuss with your advisors:
1. Changing Exemption Rates: The federal estate and gift tax threshold which rose to $13.61 million per individual for 2024, is expected to rise further in 2025 before halving in 2026. Understanding these changes is vital for those with substantial estates.
2. Lifetime Giving Opportunities: Planning ahead of the 2026 deadline is essential. Advisors can help you explore options like trusts and partnership structures to strike the right balance for your situation.
3. Maximizing Charitable Impact: With the increased standard deduction, strategic charitable giving, like "bunching" contributions, can maximize both tax benefits and support for organizations. Consider tax-free qualified charitable distributions (QCDs) for those aged 70½ or older.
4. Secure 2.0 Act and Education Gifts: The Secure 2.0 Act offers new possibilities for 529 educational savings plans, allowing rollover contributions to a Roth IRA, and adding flexibility to gifting strategies.
In this dynamic environment, discussing these opportunities with advisors sooner rather than later is prudent. The potential expiration of the Tax Cuts and Jobs Act in 2026 and the current uncertainty in tax laws underscore the importance of proactive planning for your family's unique situation.
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