October 29, 2024 • 27 mins
Understanding the implications of the increased federal estate tax and gift exemptions is crucial for effective estate planning. Join the conversation on how these changes can affect your financial future.
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Episode Transcript
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Speaker 1 (00:30):
Well, good afternoon, Michiganers. Today is Tuesday, October twenty nine,
twenty twenty four, only a couple more days until Halloween,
and of course this is Tuesday with Tom, Michigan's only
weekly Internet show where we do answer your questions about
(00:52):
estate planning and a state settlement in Michigan. As always,
I'm your host, Tom Doyle, a state planning attorney, lifelong resident,
an ambassador for all things good in this great state
of Michigan. Welcome to today's program. Well, last episode Medicaid
(01:13):
in Michigan. Why you should remove your home.
Speaker 2 (01:16):
From your trust.
Speaker 1 (01:18):
If you have a living trust and you have deeded
your home into your trust, there might be concerns about
that if you have to apply for medicaid. So I
invite you. If you have a trust and you've deeded
your home into your trust, please listen to last week's
episode where I talk about why it might be necessary
(01:42):
or recommended that you would remove the home from your trust. Today, well,
we're almost almost at the end.
Speaker 2 (01:55):
Seems hard to believe.
Speaker 1 (01:56):
Of twenty twenty four, we're November's right around the corner,
Holidays will be here, and before you know it, it's
going to be January first, So.
Speaker 2 (02:04):
Today twenty twenty five increase.
Speaker 1 (02:07):
In federal estate tax and gift exemptions. But please remember
that what I'm about to discuss during this program is,
as always, for educational purposes only. It is not intended
to be legal advice. As always, you need to work
with your attorney and your tax advisor to determine what
(02:30):
is appropriate for you and your estate plan. Twenty twenty
(02:57):
five increases in federal estate tax and gift exemptions.
Speaker 2 (03:01):
What does that mean?
Speaker 1 (03:02):
Well, obviously, on January first, there's going to be some increases. Annually,
the IRS takes a look under the current law, based
upon inflationary decisions, determines what is going to be the
increased amount for various taxes, and today we're going to
(03:24):
simply talk about the federal estate tax and the federal
gift tax exemption. So twenty twenty five, there's going to
be significant adjustments to those that. If your family looking
to manage wealth then reduce future tax burdens, you should
(03:46):
be aware of these increases and how they might affect
your planning. So what are the new exemption limits? Well,
the IRS recently announced an increase in the federal estate
and give tax exemption. First, estate tax exemption. A state tax,
(04:06):
as you know, is the amount of a state that
you can have at the time of your death before
the federal government starts collecting a tax based upon the
value of that estate, which is called the federal estate
now the estate tax or federal state tax.
Speaker 2 (04:25):
The state the state, I'm.
Speaker 1 (04:28):
Sorry, it has to be of a certain size before
it's going to be subject to that, and that is
a federal estate tax exemption amount. So in twenty twenty four,
which is effective for the next two months, essentially, that
federal estate tax exemption amount is thirteen million, six hundred
(04:48):
and ten thousand dollars. That means, if you were to
die yet this year in twenty twenty four, if your
estate is not more than sixteen million, six hundred and
ten thousand dollars, you would not owe a federal estate tax.
On January first, that exemption amount is going to increase
(05:09):
to thirteen million, nine hundred and ninety thousand dollars. So
again next year twenty twenty five, we don't worry about
federal estate taxes, at least having a pay of federal
estate tax unless when someone dies in twenty twenty five,
their estate is larger than thirteen million, nine hundred.
Speaker 2 (05:33):
And ninety thousand dollars. The other.
Speaker 1 (05:39):
Consideration that we have for taxes that we want to
talk about the increases the gift tax exclusion. The gift
tax exclusion that's the amount that you can give anybody
during a calendar year and you don't have to worry
about filing a gift tax return because it's not subject to.
Speaker 2 (05:57):
A gift tax.
Speaker 1 (05:58):
That exclusion amount currently in twenty twenty four is eighteen
thousand dollars, meaning during the next two months, if you
have not already made gifts to anybody during twenty twenty four,
you could give anyone up to eighteen thousand dollars a
year yet in twenty twenty four and you don't have
(06:21):
to worry about paying a gift tax. Now twenty twenty
five January first, that eighteen is going to become nineteen
thousand dollars, So again in twenty twenty five, you will
be able to give more way by way of gifts
without having to worry about a gift tax. Now, the
(06:43):
primary reason that we oftentimes talk about the taxes is
because how high the taxes can be. We have what's
considered a combined a state in gift tax, it gets
a little bit into the weeds. But at the end
of the day, the maximum amount for federal state tax
and gift taxes and then NAY is about forty percent.
(07:03):
Now it's a graduated scale, but in general conversation with clients,
we're talking about a forty percent tax. Generally people are
interested in paying a forty percent tax either on gifts
or forty percent tax on their estate at the time
of their deaths. So these increases for twenty twenty five
(07:25):
reflect the inflation of judgments that the IRS is making
as a have an ongoing recalibration of taxes. The point
is to try and balance tax burdens relative to rising
living costs. Now, obviously, higher exemption amounts allows individuals to
(07:47):
transfer more assets tax free over their lifetime or at
the time or their death, which obviously can significantly affect
a client's long term financial planning strategies.
Speaker 2 (08:01):
Now, there's another concept.
Speaker 1 (08:03):
I've talked about it before in other episodes, but I
should remind you of it here, and that is this
concept of portability with married couples. Portability to be with
married couples, and what does that mean. It's a key
feature of federalistate tax that allows married couples to essentially
(08:23):
double their estate tax exemption. Twenty twenty four, you have
a thirteen million, six hundred and ten thousand dollars exemption.
A married couple can essentially double that amount because you
each have a thirteen million, six hundred and ten thousand
dollars exemption. But the concept of portability is this. Let's
(08:47):
say I have an estate I die in twenty twenty four,
and my state.
Speaker 2 (08:53):
Is only three million dollars.
Speaker 1 (08:56):
That means I basically have ten million, six hundred ten
ten thousand of unused federal state tax exemption. I can,
with this concept of portability, pass that unused portion of
my state tax exemption to my spouse. So my spouse
(09:18):
can add now to her thirteen million, six hundred.
Speaker 2 (09:24):
Ten thousand my unused.
Speaker 1 (09:27):
Ten million, six hundred and ten thousand, which is why
we talk about portability, essentially doubling the exemption amount between
married people. So next year twenty twenty five, each spouse
has at thirteen million, nine hundred ninety thousand dollars. That
(09:48):
essentially means they can now have a combined estate of
twenty seven million, nine hundred and eighty thousand dollars before
they have to worry about federal estates.
Speaker 2 (10:00):
Is now a couple of.
Speaker 1 (10:01):
Caveats, one being this only applies to us spouses. Okay,
these exemption amounts are only talking about US spouses. Secondly,
with respect to portability, portability be has to be elected
on the estate tax return that gets filed after the
(10:22):
first spouse's death. So when someone dies a married couple,
if they want to take advantage of this concept of portability,
it's important that they meet with a tax professional to
determine what needs to be filed in order to pass
on the unused exemption amount. We will even have clients
(10:47):
today who don't really have much of an estate, but
the concern is that the surviving spouse might one day
have a large enough estate and so make sure that
they file that Gift Tact exemption to protect.
Speaker 2 (11:05):
For that other spouse.
Speaker 1 (11:07):
And the common one I use is someone who's in
medical school.
Speaker 2 (11:11):
Spouse who's in medical.
Speaker 1 (11:12):
School is likely going to have a very high yearningcapacity
depending upon what area of medicine that they're going to
go on to. Perhaps their spouse dies while they're still
in medical school. It might be important one day that
that unused federalistate tax exemption has passed on to that
surviving spouse, And so there's a situation where it could
(11:37):
be prudent tax planning even though there is no federal
state tax due because of the death of the first
spouse to pass on that concept of portability. So we're
still going to have portability in twenty twenty five. So
what are some of the implications if you will for
(11:58):
your state in gift tex plan. Well, essentially, the twenty
twenty five increases are going to provide an opportunity for
again high networth families to reduce a state and gift
tax liabilities.
Speaker 2 (12:13):
And here's some ideas. One with that.
Speaker 1 (12:16):
Nineteen thousand dollars annual gift tax exclusion, individuals can start
giving that amount if they want to any number of
recipients without affecting their lifetime exemption. So one of the
strategies that oftentimes clients will use is making these annual
gifts quite frankly, as a way to shrink the size.
Speaker 2 (12:39):
Of the estate.
Speaker 1 (12:40):
So let's say, for example, that you had a federalist
a sizeable estate right now that in twenty twenty five
is going to exceed that thirteen million, nine hundred and
ninety thousand. One of the things that you might consider
doing is using annual gifts, using that nineteen thousand dollar
(13:00):
annual gift as a way to shrink the size of
that state. That could be to multiple airrs, depend upon
how many people maybe children, grandchildren, great grandchildren, whatever happens
to be using that as a tool for reducing the
size of the state. Now that best works over a
(13:23):
number of years, if you had nineteen thousand dollars a year,
If you did eighteen thousand dollars a year this year,
and nineteen thousand dollars a year next year, and going
forward over time. Annual gifting is a tool that's oftentimes
used to shrink the size of a state that's subject
to federal state taxes. Larger exemptions also make it feasible
(13:48):
to consider establishing and funding certain types of trust rather
than your normal revocable living trust, something like an irrevocable
life insurance trust, or certain types of charitable trust, or
perhaps some sort of an other a different irrevocable trust.
(14:10):
The concept being to use these exemption amounts with some
additional planning tools. Again, all designed towards shrinking or avoiding
that potential forty percent federal estate tax liability. Another consideration, obviously,
(14:32):
is you need to review your current state plans. If
you've already structured a plan with exemptions in mind, and
now these exemptions are going to be increasing, or you
a structured a plan where you didn't have a federal
estate tax consideration, but maybe your state has grown, you
want to revisit different whatever you've got. Do you have
(14:56):
a trust, do you have wills, what are your beneficiary resignations,
et cetera, et cetera, so that you can take advantage
of these higher exemption amounts. Now that is twenty twenty five,
But you might be sitting there saying, well, hey, Tom,
(15:17):
I don't have a thirteen million, nine hundred and ninety
thousand dollars US to eight, so I don't have to
worry about any of this. And that could be the
case if you know you're going to die in twenty
twenty five. But I talked about this in previous episodes.
What we need to look at now is potential changes
(15:41):
beyond twenty twenty five, because while the twenty twenty five
increase is a welcome development, It's essential to remember that
the current Gift Tex Exemption Federalist D tax exemptions are
set to revert to pre twenty eighteen levels on January first,
(16:08):
twenty twenty six. That means are going to sunset that
nineteen I'm sorry, thirteen million, nine hundred and ninety thousand
dollars that you have next year. That because if the
law sunsets as it's currently scheduled to, and the only
way it's not going to sunset is if whatever president
(16:31):
we have after the election next month, and whatever House
and Senate we have, if they get together and change it,
they can do that. But if they don't or can't
get together and change it, that means those exemptions are
going to sunset on January first, twenty twenty six. And
essentially what that means is that thirteen million, nine hundred
(16:52):
ninety thousand dollars next year is now going to be
somewhere in the area of five to six million. Five
to six million obviously is much less than the thirteen million.
So you might be sitting there saying, hey, I don't
have a thirteen million dollar estate or an almost fourteen
(17:14):
million dollars state. The question is do you have an
estate though that might be about five to six million dollars,
and if so, or more than five to six million dollars,
if so, planning should start looking. You should start looking
at your planning now for what options you have in
(17:37):
order to shrink that estate so that if the law
stays as it is on January first, twenty twenty six,
you will have done appropriate estate planning. So, because the
law is going to sunset, okay, you need to look
at utilizing the higher exemptions now in order to avoid
(18:01):
potential taxes that you would have as of January first,
twenty twenty six. So even if at bottom lane, even
if you don't have federal state tax today, look at
what the numbers are projected to be January first, twenty
twenty six. A lot of are higher network clients we're
starting to talk to you about. Okay, what are the
(18:23):
planning options. Don't wait until December of next year to
suddenly say, oh my god, I need to go out
and do something, because you might not be able to
find an attorney who's going to have the time to
be able to do it because of all the other
people that are.
Speaker 2 (18:38):
Waiting until the end of the year.
Speaker 1 (18:40):
I suggest that it's prudent to look and say, okay,
let's see what happens with the presidential election, let's see
who's going to control the House in Congress, and start
thinking about what options you might have and what it's
going to take to implement those options, and then kind
of work backwards from there. From December thirtieth December thirty first,
(19:04):
at twenty twenty five, what time frame do you need
to start working to implement the options to shrink the estate?
If in fact it is going to reduce to that
five to six million, the good news is we're still
going to have portability, so again between spouses, it's going
to be somewhere between at least best guess right now,
(19:25):
ten and twelve million dollars with the portability between spouses.
So some of the key takeaways I guess for individual
and the family one plan now to lock in those benefits.
If you have an estate near or above the exemption threshold,
(19:46):
the twenty twenty five increase offers an important opportunity to
reduce your further your future tax burdens. Leverage portabilities, make
sure that if a spouse guys, the surviving spouse gets
appropriate tax advice from a tax professional to look and say,
(20:09):
what do I need to do to protect portability in
going forward and take advantage of that annual gift exclusion
making gifts to family members or perhaps and it's not
subject to the federalistate tax exclusion we're talking about, but
(20:30):
there might be some whole charitable or giving opportunities, which
is a whole different conversation that can be had as
a tool for reducing the size of the estate. So,
in summary twenty twenty five, federal estate and gift tax
exemption increases create opportunities to protect and manage your wealth efficiently.
(20:54):
Whether you're looking to optimize annual gifting, create tax managed trust,
review an existing estate plan, those changes should be factor
into your twenty twenty five planning discussions, and by proactively planning,
you can ensure that more of your assets reach your
(21:16):
intended beneficiaries.
Speaker 2 (21:18):
You will be protecting.
Speaker 1 (21:20):
Your family's wealth for generations to come. And finally, again
with the potential for these terms these amounts, if you
will limit sunsetting January twenty twenty six, now's the time,
or at least the beginning of twenty twenty five is
the time to start looking at what your options are,
(22:05):
of course, Aman and I would be honored to have
the opportunity to help you look at your estate tax situation,
work with your tax advisor to come up with an
appropriate plan, either to take advantage as much as you
can of the exemption amounts that are currently in place,
and how do you protect those exemption amounts going to
(22:26):
twenty twenty five, or if you don't obviously have a
federal estate tax issues, certainly we are here to help
you put together your estate plan to protect your loved ones,
or perhaps a mending a current plan that you have,
or of course in settling in a state. Simply head
on over to Doyle LAWPC dot com. There you're going
(22:47):
to find all the information that you need to either
schedule an in personal, in person consultation that can be
at our East Lansing location or our Grand Rapids headquarter,
or scheduling a virtual consultation via Zoom or telephone. That
way we can meet with you wherever you happen to
(23:08):
be in this great state of Michigan. And reminder too,
if all you're looking for is an individual legal document,
maybe all you need is a new durable power of attorney.
You've listened to my previous episode about changes of the
law on durable powers of attorney that took effect on
(23:29):
July first, and you're saying, Hey, I need to get
a new durable power of attorney prepared. Head on over
to the legal store. You're going to find information on
how you can order individual legal documents that are prepared
by an attorney in our office that would then be
sent to you for execution.
Speaker 2 (23:50):
Again, all of that information.
Speaker 1 (23:53):
Is available at the website Doyle LAWPC dot com. Well,
I think that is going to be it for today's show.
(24:16):
As always, ooh, if you have a comment about the program,
perhaps a topic that you'd like to have me discuss,
because many of the episodes are based upon suggestions for
topics that clients are interested in or questions that you'd
like to have answered, simply head out over to Tuesday
with Tom dot com, leave a voice message by clicking
(24:38):
on the microphone, or send me an email that would
be Tom at Tuesday with Tom dot com. And of course,
please follow us on Facebook, follow the office on Facebook,
and invite your friends and family to do so as well.
We try and keep some additional in addition to links
(24:58):
to the episode of the some interesting information that we
think you might find helpful as you're looking at even
traveling in the state and mission or things to do
in the state of Michigan, other issues that come up
relative to a state planning and that would be Tuesday
with Tom. That's a Facebook page. Obviously, the office Facebook
(25:21):
page would be Doyle Law PC. And don't forget please
join our email list.
Speaker 2 (25:28):
We have a.
Speaker 1 (25:29):
Week a monthly newsletter that will put you on talking
about different estate planning or a state settlement issues or
different issues that we think are of interest to clients.
Simply subscribe to the news letter at Tuesday with Tom
dot com. You can also subscribe at Doyle LAWPC dot com.
Speaker 2 (25:50):
Either one of those is going to get you on
the newsletter list.
Speaker 1 (25:55):
Remember two, Tuesday with Tom is available on Apple, pot Podcast, Spotify,
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regularly listen to podcasts, you should find Tuesday with Tom.
Speaker 2 (26:13):
And if you don't, let me know.
Speaker 1 (26:14):
And I'll see what I can do to make the
program available on your favorite podcast service. You can also
ask your smart speaker to play Tuesday with Tom. Well,
thanks again for spending some of your time with us
today and As always, I hope that you have an
(26:35):
awesome day and an awesome week in Michigan. Happy Halloween,
and stay safe. Tuesday with Tom has been brought to
you by the estate planning attorneys at Doyle Law PC.
To learn how we can help you with your estate
(26:56):
plan or with settling a loved one's estate, please call
us today A five one seven three two three seven
three six six. That's five one seven, three two three
seven three six six
Speaker 2 (27:13):
Mm hmm
Well, good afternoon, Michiganers. Today is Tuesday, October twenty nine,
twenty twenty four, only a couple more days until Halloween,
and of course this is Tuesday with Tom, Michigan's only
weekly Internet show where we do answer your questions about
(00:52):
estate planning and a state settlement in Michigan. As always,
I'm your host, Tom Doyle, a state planning attorney, lifelong resident,
an ambassador for all things good in this great state
of Michigan. Welcome to today's program. Well, last episode Medicaid
(01:13):
in Michigan. Why you should remove your home.
Speaker 2 (01:16):
From your trust.
Speaker 1 (01:18):
If you have a living trust and you have deeded
your home into your trust, there might be concerns about
that if you have to apply for medicaid. So I
invite you. If you have a trust and you've deeded
your home into your trust, please listen to last week's
episode where I talk about why it might be necessary
(01:42):
or recommended that you would remove the home from your trust. Today, well,
we're almost almost at the end.
Speaker 2 (01:55):
Seems hard to believe.
Speaker 1 (01:56):
Of twenty twenty four, we're November's right around the corner,
Holidays will be here, and before you know it, it's
going to be January first, So.
Speaker 2 (02:04):
Today twenty twenty five increase.
Speaker 1 (02:07):
In federal estate tax and gift exemptions. But please remember
that what I'm about to discuss during this program is,
as always, for educational purposes only. It is not intended
to be legal advice. As always, you need to work
with your attorney and your tax advisor to determine what
(02:30):
is appropriate for you and your estate plan. Twenty twenty
(02:57):
five increases in federal estate tax and gift exemptions.
Speaker 2 (03:01):
What does that mean?
Speaker 1 (03:02):
Well, obviously, on January first, there's going to be some increases. Annually,
the IRS takes a look under the current law, based
upon inflationary decisions, determines what is going to be the
increased amount for various taxes, and today we're going to
(03:24):
simply talk about the federal estate tax and the federal
gift tax exemption. So twenty twenty five, there's going to
be significant adjustments to those that. If your family looking
to manage wealth then reduce future tax burdens, you should
(03:46):
be aware of these increases and how they might affect
your planning. So what are the new exemption limits? Well,
the IRS recently announced an increase in the federal estate
and give tax exemption. First, estate tax exemption. A state tax,
(04:06):
as you know, is the amount of a state that
you can have at the time of your death before
the federal government starts collecting a tax based upon the
value of that estate, which is called the federal estate
now the estate tax or federal state tax.
Speaker 2 (04:25):
The state the state, I'm.
Speaker 1 (04:28):
Sorry, it has to be of a certain size before
it's going to be subject to that, and that is
a federal estate tax exemption amount. So in twenty twenty four,
which is effective for the next two months, essentially, that
federal estate tax exemption amount is thirteen million, six hundred
(04:48):
and ten thousand dollars. That means, if you were to
die yet this year in twenty twenty four, if your
estate is not more than sixteen million, six hundred and
ten thousand dollars, you would not owe a federal estate tax.
On January first, that exemption amount is going to increase
(05:09):
to thirteen million, nine hundred and ninety thousand dollars. So
again next year twenty twenty five, we don't worry about
federal estate taxes, at least having a pay of federal
estate tax unless when someone dies in twenty twenty five,
their estate is larger than thirteen million, nine hundred.
Speaker 2 (05:33):
And ninety thousand dollars. The other.
Speaker 1 (05:39):
Consideration that we have for taxes that we want to
talk about the increases the gift tax exclusion. The gift
tax exclusion that's the amount that you can give anybody
during a calendar year and you don't have to worry
about filing a gift tax return because it's not subject to.
Speaker 2 (05:57):
A gift tax.
Speaker 1 (05:58):
That exclusion amount currently in twenty twenty four is eighteen
thousand dollars, meaning during the next two months, if you
have not already made gifts to anybody during twenty twenty four,
you could give anyone up to eighteen thousand dollars a
year yet in twenty twenty four and you don't have
(06:21):
to worry about paying a gift tax. Now twenty twenty
five January first, that eighteen is going to become nineteen
thousand dollars, So again in twenty twenty five, you will
be able to give more way by way of gifts
without having to worry about a gift tax. Now, the
(06:43):
primary reason that we oftentimes talk about the taxes is
because how high the taxes can be. We have what's
considered a combined a state in gift tax, it gets
a little bit into the weeds. But at the end
of the day, the maximum amount for federal state tax
and gift taxes and then NAY is about forty percent.
(07:03):
Now it's a graduated scale, but in general conversation with clients,
we're talking about a forty percent tax. Generally people are
interested in paying a forty percent tax either on gifts
or forty percent tax on their estate at the time
of their deaths. So these increases for twenty twenty five
(07:25):
reflect the inflation of judgments that the IRS is making
as a have an ongoing recalibration of taxes. The point
is to try and balance tax burdens relative to rising
living costs. Now, obviously, higher exemption amounts allows individuals to
(07:47):
transfer more assets tax free over their lifetime or at
the time or their death, which obviously can significantly affect
a client's long term financial planning strategies.
Speaker 2 (08:01):
Now, there's another concept.
Speaker 1 (08:03):
I've talked about it before in other episodes, but I
should remind you of it here, and that is this
concept of portability with married couples. Portability to be with
married couples, and what does that mean. It's a key
feature of federalistate tax that allows married couples to essentially
(08:23):
double their estate tax exemption. Twenty twenty four, you have
a thirteen million, six hundred and ten thousand dollars exemption.
A married couple can essentially double that amount because you
each have a thirteen million, six hundred and ten thousand
dollars exemption. But the concept of portability is this. Let's
(08:47):
say I have an estate I die in twenty twenty four,
and my state.
Speaker 2 (08:53):
Is only three million dollars.
Speaker 1 (08:56):
That means I basically have ten million, six hundred ten
ten thousand of unused federal state tax exemption. I can,
with this concept of portability, pass that unused portion of
my state tax exemption to my spouse. So my spouse
(09:18):
can add now to her thirteen million, six hundred.
Speaker 2 (09:24):
Ten thousand my unused.
Speaker 1 (09:27):
Ten million, six hundred and ten thousand, which is why
we talk about portability, essentially doubling the exemption amount between
married people. So next year twenty twenty five, each spouse
has at thirteen million, nine hundred ninety thousand dollars. That
(09:48):
essentially means they can now have a combined estate of
twenty seven million, nine hundred and eighty thousand dollars before
they have to worry about federal estates.
Speaker 2 (10:00):
Is now a couple of.
Speaker 1 (10:01):
Caveats, one being this only applies to us spouses. Okay,
these exemption amounts are only talking about US spouses. Secondly,
with respect to portability, portability be has to be elected
on the estate tax return that gets filed after the
(10:22):
first spouse's death. So when someone dies a married couple,
if they want to take advantage of this concept of portability,
it's important that they meet with a tax professional to
determine what needs to be filed in order to pass
on the unused exemption amount. We will even have clients
(10:47):
today who don't really have much of an estate, but
the concern is that the surviving spouse might one day
have a large enough estate and so make sure that
they file that Gift Tact exemption to protect.
Speaker 2 (11:05):
For that other spouse.
Speaker 1 (11:07):
And the common one I use is someone who's in
medical school.
Speaker 2 (11:11):
Spouse who's in medical.
Speaker 1 (11:12):
School is likely going to have a very high yearningcapacity
depending upon what area of medicine that they're going to
go on to. Perhaps their spouse dies while they're still
in medical school. It might be important one day that
that unused federalistate tax exemption has passed on to that
surviving spouse, And so there's a situation where it could
(11:37):
be prudent tax planning even though there is no federal
state tax due because of the death of the first
spouse to pass on that concept of portability. So we're
still going to have portability in twenty twenty five. So
what are some of the implications if you will for
(11:58):
your state in gift tex plan. Well, essentially, the twenty
twenty five increases are going to provide an opportunity for
again high networth families to reduce a state and gift
tax liabilities.
Speaker 2 (12:13):
And here's some ideas. One with that.
Speaker 1 (12:16):
Nineteen thousand dollars annual gift tax exclusion, individuals can start
giving that amount if they want to any number of
recipients without affecting their lifetime exemption. So one of the
strategies that oftentimes clients will use is making these annual
gifts quite frankly, as a way to shrink the size.
Speaker 2 (12:39):
Of the estate.
Speaker 1 (12:40):
So let's say, for example, that you had a federalist
a sizeable estate right now that in twenty twenty five
is going to exceed that thirteen million, nine hundred and
ninety thousand. One of the things that you might consider
doing is using annual gifts, using that nineteen thousand dollar
(13:00):
annual gift as a way to shrink the size of
that state. That could be to multiple airrs, depend upon
how many people maybe children, grandchildren, great grandchildren, whatever happens
to be using that as a tool for reducing the
size of the state. Now that best works over a
(13:23):
number of years, if you had nineteen thousand dollars a year,
If you did eighteen thousand dollars a year this year,
and nineteen thousand dollars a year next year, and going
forward over time. Annual gifting is a tool that's oftentimes
used to shrink the size of a state that's subject
to federal state taxes. Larger exemptions also make it feasible
(13:48):
to consider establishing and funding certain types of trust rather
than your normal revocable living trust, something like an irrevocable
life insurance trust, or certain types of charitable trust, or
perhaps some sort of an other a different irrevocable trust.
(14:10):
The concept being to use these exemption amounts with some
additional planning tools. Again, all designed towards shrinking or avoiding
that potential forty percent federal estate tax liability. Another consideration, obviously,
(14:32):
is you need to review your current state plans. If
you've already structured a plan with exemptions in mind, and
now these exemptions are going to be increasing, or you
a structured a plan where you didn't have a federal
estate tax consideration, but maybe your state has grown, you
want to revisit different whatever you've got. Do you have
(14:56):
a trust, do you have wills, what are your beneficiary resignations,
et cetera, et cetera, so that you can take advantage
of these higher exemption amounts. Now that is twenty twenty five,
But you might be sitting there saying, well, hey, Tom,
(15:17):
I don't have a thirteen million, nine hundred and ninety
thousand dollars US to eight, so I don't have to
worry about any of this. And that could be the
case if you know you're going to die in twenty
twenty five. But I talked about this in previous episodes.
What we need to look at now is potential changes
(15:41):
beyond twenty twenty five, because while the twenty twenty five
increase is a welcome development, It's essential to remember that
the current Gift Tex Exemption Federalist D tax exemptions are
set to revert to pre twenty eighteen levels on January first,
(16:08):
twenty twenty six. That means are going to sunset that
nineteen I'm sorry, thirteen million, nine hundred and ninety thousand
dollars that you have next year. That because if the
law sunsets as it's currently scheduled to, and the only
way it's not going to sunset is if whatever president
(16:31):
we have after the election next month, and whatever House
and Senate we have, if they get together and change it,
they can do that. But if they don't or can't
get together and change it, that means those exemptions are
going to sunset on January first, twenty twenty six. And
essentially what that means is that thirteen million, nine hundred
(16:52):
ninety thousand dollars next year is now going to be
somewhere in the area of five to six million. Five
to six million obviously is much less than the thirteen million.
So you might be sitting there saying, hey, I don't
have a thirteen million dollar estate or an almost fourteen
(17:14):
million dollars state. The question is do you have an
estate though that might be about five to six million dollars,
and if so, or more than five to six million dollars,
if so, planning should start looking. You should start looking
at your planning now for what options you have in
(17:37):
order to shrink that estate so that if the law
stays as it is on January first, twenty twenty six,
you will have done appropriate estate planning. So, because the
law is going to sunset, okay, you need to look
at utilizing the higher exemptions now in order to avoid
(18:01):
potential taxes that you would have as of January first,
twenty twenty six. So even if at bottom lane, even
if you don't have federal state tax today, look at
what the numbers are projected to be January first, twenty
twenty six. A lot of are higher network clients we're
starting to talk to you about. Okay, what are the
(18:23):
planning options. Don't wait until December of next year to
suddenly say, oh my god, I need to go out
and do something, because you might not be able to
find an attorney who's going to have the time to
be able to do it because of all the other
people that are.
Speaker 2 (18:38):
Waiting until the end of the year.
Speaker 1 (18:40):
I suggest that it's prudent to look and say, okay,
let's see what happens with the presidential election, let's see
who's going to control the House in Congress, and start
thinking about what options you might have and what it's
going to take to implement those options, and then kind
of work backwards from there. From December thirtieth December thirty first,
(19:04):
at twenty twenty five, what time frame do you need
to start working to implement the options to shrink the estate?
If in fact it is going to reduce to that
five to six million, the good news is we're still
going to have portability, so again between spouses, it's going
to be somewhere between at least best guess right now,
(19:25):
ten and twelve million dollars with the portability between spouses.
So some of the key takeaways I guess for individual
and the family one plan now to lock in those benefits.
If you have an estate near or above the exemption threshold,
(19:46):
the twenty twenty five increase offers an important opportunity to
reduce your further your future tax burdens. Leverage portabilities, make
sure that if a spouse guys, the surviving spouse gets
appropriate tax advice from a tax professional to look and say,
(20:09):
what do I need to do to protect portability in
going forward and take advantage of that annual gift exclusion
making gifts to family members or perhaps and it's not
subject to the federalistate tax exclusion we're talking about, but
(20:30):
there might be some whole charitable or giving opportunities, which
is a whole different conversation that can be had as
a tool for reducing the size of the estate. So,
in summary twenty twenty five, federal estate and gift tax
exemption increases create opportunities to protect and manage your wealth efficiently.
(20:54):
Whether you're looking to optimize annual gifting, create tax managed trust,
review an existing estate plan, those changes should be factor
into your twenty twenty five planning discussions, and by proactively planning,
you can ensure that more of your assets reach your
(21:16):
intended beneficiaries.
Speaker 2 (21:18):
You will be protecting.
Speaker 1 (21:20):
Your family's wealth for generations to come. And finally, again
with the potential for these terms these amounts, if you
will limit sunsetting January twenty twenty six, now's the time,
or at least the beginning of twenty twenty five is
the time to start looking at what your options are,
(22:05):
of course, Aman and I would be honored to have
the opportunity to help you look at your estate tax situation,
work with your tax advisor to come up with an
appropriate plan, either to take advantage as much as you
can of the exemption amounts that are currently in place,
and how do you protect those exemption amounts going to
(22:26):
twenty twenty five, or if you don't obviously have a
federal estate tax issues, certainly we are here to help
you put together your estate plan to protect your loved ones,
or perhaps a mending a current plan that you have,
or of course in settling in a state. Simply head
on over to Doyle LAWPC dot com. There you're going
(22:47):
to find all the information that you need to either
schedule an in personal, in person consultation that can be
at our East Lansing location or our Grand Rapids headquarter,
or scheduling a virtual consultation via Zoom or telephone. That
way we can meet with you wherever you happen to
(23:08):
be in this great state of Michigan. And reminder too,
if all you're looking for is an individual legal document,
maybe all you need is a new durable power of attorney.
You've listened to my previous episode about changes of the
law on durable powers of attorney that took effect on
(23:29):
July first, and you're saying, Hey, I need to get
a new durable power of attorney prepared. Head on over
to the legal store. You're going to find information on
how you can order individual legal documents that are prepared
by an attorney in our office that would then be
sent to you for execution.
Speaker 2 (23:50):
Again, all of that information.
Speaker 1 (23:53):
Is available at the website Doyle LAWPC dot com. Well,
I think that is going to be it for today's show.
(24:16):
As always, ooh, if you have a comment about the program,
perhaps a topic that you'd like to have me discuss,
because many of the episodes are based upon suggestions for
topics that clients are interested in or questions that you'd
like to have answered, simply head out over to Tuesday
with Tom dot com, leave a voice message by clicking
(24:38):
on the microphone, or send me an email that would
be Tom at Tuesday with Tom dot com. And of course,
please follow us on Facebook, follow the office on Facebook,
and invite your friends and family to do so as well.
We try and keep some additional in addition to links
(24:58):
to the episode of the some interesting information that we
think you might find helpful as you're looking at even
traveling in the state and mission or things to do
in the state of Michigan, other issues that come up
relative to a state planning and that would be Tuesday
with Tom. That's a Facebook page. Obviously, the office Facebook
(25:21):
page would be Doyle Law PC. And don't forget please
join our email list.
Speaker 2 (25:28):
We have a.
Speaker 1 (25:29):
Week a monthly newsletter that will put you on talking
about different estate planning or a state settlement issues or
different issues that we think are of interest to clients.
Simply subscribe to the news letter at Tuesday with Tom
dot com. You can also subscribe at Doyle LAWPC dot com.
Speaker 2 (25:50):
Either one of those is going to get you on
the newsletter list.
Speaker 1 (25:55):
Remember two, Tuesday with Tom is available on Apple, pot Podcast, Spotify,
Amazon Music, iHeartRadio, Speaker, Google Podcast. Anywhere that you likely
regularly listen to podcasts, you should find Tuesday with Tom.
Speaker 2 (26:13):
And if you don't, let me know.
Speaker 1 (26:14):
And I'll see what I can do to make the
program available on your favorite podcast service. You can also
ask your smart speaker to play Tuesday with Tom. Well,
thanks again for spending some of your time with us
today and As always, I hope that you have an
(26:35):
awesome day and an awesome week in Michigan. Happy Halloween,
and stay safe. Tuesday with Tom has been brought to
you by the estate planning attorneys at Doyle Law PC.
To learn how we can help you with your estate
(26:56):
plan or with settling a loved one's estate, please call
us today A five one seven three two three seven
three six six. That's five one seven, three two three
seven three six six
Speaker 2 (27:13):
Mm hmm
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