Once summer winds down, estate planning attorneys start thinking about end-of-year to-do lists. There’s a lot to consider, especially this year. A recent article from Forbes asks the question: “2024 Year End Estate Planning: Are You Ready?”
Pre-2026 planning needs to happen sooner than later. When the federal estate exemption is cut in half, it will be too late to act. Estate planning attorneys are recommending that their clients address this before 2024 ends. Your situation may be best served with a Spousal Lifetime Access Trust (SLAT). Avoiding IRS scrutiny by leaving time between various transfers funding accounts if both spouses have SLATs. Not enough time may make a SLAT strategy vulnerable to IRS scrutiny because of the Reciprocal Tax Doctrine—trusts being too similar can be undone. It is best to have this done in 2024.
Regardless of who wins the presidential election, you need to get your estate planning in place. Even if you don’t go forward with big changes to your estate plan, having everything prepared in advance will provide more opportunities. You don’t lose anything by taking steps now to retitle assets to facilitate planning. Grantor trusts are always a good option.
If you wait until after the election, you may find yourself in a long line of last-minute decision-makers. An inexpensive trust can be created with a family trustee and trust protector. If it’s necessary, the jurisdiction can be moved in the future. If gift or transfer documents are properly prepared, you could even sign them as late as December 31, 2024. However, these steps can only occur if everything’s set up in advance.
2024 saw a Supreme Court decision with implications for business owners known as “Connelly.” If a business entity bought insurance on the lives of the owners intended to fund a buy-out if the insureds die, the value of the life insurance must now be included in the value of the business. Pre-Connelly, business owners also used LLCs to purchase life insurance to keep the value of the insurance policy out of the value of the business. This appears to now be subject to the same rules. If you are a business owner, review insurance policy ownership and buyout arrangements to be sure that valuations are correct and address the implications of the Connelly case.
Another Supreme Court Case, “Loper,” overruled how government agencies, like the Treasury and the IRS, may interpret statutes. Unless a law expressly states that the agency should issue guidance on the law, the courts no longer are required to give weight to what the IRS (or other government agency) has decided and can make decisions regarding ambiguous laws independently. This is still being figured out by the courts and attorneys. However, it would be wise to have your estate planning attorney review planning decisions if any might be scrutinized.
Final regulations for the SECURE Act have been issued by the Treasury, applying generally to calendar years beginning on or after January 1, 2025. This involves retirement plan rules, using trusts to hold retirement plan benefits for minors and other related issues. Your estate planning attorney will be able to explain whether any of these regulations impact your own estate plan.
The best way to be sure that your estate plan still achieves your goals is to meet with your estate planning attorney to review your plan. It may be fine. However, it’s best to find out if any changes need to be made before time runs out.
Reference: Forbes (September 10, 2024) “2024 Year End Estate Planning: Are You Ready?”