(1.6.25) "Welcome to a new year! In the upcoming series of blog posts, we are excited to explore the essential components of estate planning," stated professional fiduciary and certified elder law Attorney RJ Connelly III. "Estate planning is not merely a task to check off your to-do list; it is a vital process that ensures your wishes are carried out after you're gone and provides for your loved ones during and after your lifetime."
"Throughout this series, we will dissect what estate planning truly involves, guiding you through the intricate web of documents critical for crafting a complete and effective estate plan," continued Attorney Connelly. "From wills and trusts to powers of attorney and healthcare directives, we will examine the purpose and significance of each document. You will learn how these elements interconnect, working harmoniously to reflect your values and priorities while safeguarding your family's future."
Attorney Connelly emphasized that whether you're just beginning to consider the importance of estate planning or have an existing plan that needs reviewing or updating, his discussions will empower you with the knowledge necessary to navigate this significant and often complex process. Understanding these concepts is critical for ensuring your estate plan meets legal requirements and represents your wishes.
Stay tuned as we detail each component of an effective estate plan, providing practical tips and expert advice. Additionally, to set the stage for this important discussion, we will first examine three major estate planning changes for 2025 that could impact your estate plans. These changes, stemming from legislation, economic shifts, and evolving societal norms, are critical for anyone considering or revisiting their estate planning strategy this year.
The Conclusion of the High Federal Estate Tax Exemption
Starting in 2025, you’ll be able to pass on a record amount of money to your heirs—almost $14 million—without having to pay federal taxes on it. However, after January 1, 2026, that amount will drop significantly to around $7 million. If you want to give away nearly $14 million tax-free, you'd need to act before the end of this year. Otherwise, any gifts over $7 million will be taxed at a rate of 40%, which could cost you a lot of money.
With President Trump returning to office and Republicans controlling Congress, there might be a chance to extend the higher exemption. But since we don’t know exactly how tax laws will change, it’s important to consider acting now if you can.
If you have valuable assets, consider gifting them before the higher limit disappears. One smart idea is to place assets likely to increase in value into a special trust for your family, such as your spouse, children, or grandchildren. This could help protect those assets from future taxes and provide financial security for your loved ones.
Another way to manage your gifts is through something called annual exclusion gifts. You can give a specific amount each year—$19,000 in 2025—to as many people as you want without affecting your overall tax exemption. If you haven't utilized this option last year (when it was $18,000), it would be wise to do so before the year ends and to make plans for 2025.
Planning these gifts can take time, so if you want to maximize the current tax benefits, it’s a good idea to consult with an estate planning attorney soon. They can help ensure you make your gifts before the end of 2025, allowing you to take full advantage of the current tax laws.
Minimum Required Distributions from Inherited Retirement Accounts
Starting back in 2020, if you received a retirement account as an inheritance, there are some important updates to the rules about withdrawing money from it. These new rules officially started on January 1.
If you're not the spouse of the person who passed away, a minor child less than ten years younger than them, or someone who is disabled or seriously ill, you’ll need to withdraw all the money from the account within ten years of their death.
Starting this year (2025), if the person who died had to take money out of that account every year before they passed away, you’ll also have to take money out each year. If they didn’t have to make those annual withdrawals, you can decide when to take the money out, but you still need to withdraw it within ten years.
It’s also important to know that if you miss these annual withdrawals after this year, the IRS will charge you a penalty. So, if you inherit a retirement account, understand these withdrawal rules, and make appropriate plans!
FinCEN Filing Deadline for Company Owners
There’s an important new rule this year that you need to be aware of called the Corporate Transparency Act (CTA). This law requires certain businesses, including many limited liability companies (LLCs) often used for estate planning, to file a special report known as the Beneficial Owner Information Report (BOIR).
You’ll need to fill out this report on the website fincen.gov. It involves sharing basic information about anyone who owns 25% or more of your business or has major control over it. Understanding this new rule is essential to ensure your business stays compliant!
A Final Word
"With constant changes in tax law on the federal and state level, estate planning foresight is crucial," stated Attorney Connelly. "The choices made now can greatly impact one's legacy. Taking proactive steps ensures substantial benefits for heirs and prepares estates for the future. At Connelly Law, we help clients navigate the complexities of estate planning with tailored strategies to protect wealth and optimize tax positions. With careful planning and expert advice, you can secure your financial legacy for future generations."
Please note that the information provided in this blog is not intended to and should not be construed as legal, financial, or medical advice. The content, materials, and information presented in this blog are solely for general informational purposes and may not be the most up-to-date information available regarding legal, financial, or medical matters. This blog may also contain links to other third-party websites that are included for the convenience of the reader or user. Please note that Connelly Law Offices, Ltd. does not necessarily recommend or endorse the contents of such third-party sites. If you have any particular legal matters, financial concerns, or medical issues, we strongly advise you to consult your attorney, professional fiduciary advisor, or medical provider.
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