2024 Estate Planning Risks You NEED to Know

Hey everyone, welcome back to We're Talking Money. I'm Phil Clark, founder and wealth advisor at OmniStar Financial Group, and today we're diving into estate taxes. So we did a show recently about taxes that you could expect to see depending on which candidate wins the 2024 race. Estate taxes we saved for a separate video. It is really in a class by itself.

So if you've been wondering whether now is the time to start making big moves with your wealth, and we've got some [Music] answers. Our first answer to you: don't start rushing out to make all kinds of changes until you better understand what's at stake.

Right now the estate tax exemption, it sits at around 13.6 million per person. If you're married, that means that you and your spouse can protect double that amount. That's over $27 million. But here's the catch. If the 2017 tax cuts expire, that's the Tax Cuts and Jobs Act passed under Donald Trump back in 17, that exemption could be cut in half by the beginning of 2026. That would take it back down to about $7 million, and that means that a lot more estates, nearly 9,000, are projected in 2026 to be affected, and that's compared to around, say, 4,000 today.

It is no surprise that a lot of wealthy families are calling up their estate planning attorneys. They're asking whether they should start making moves to shield their fortunes. Regardless of what fortune means to you, it all matters.

What can you do right now? Well, for many people, setting up trusts and making lifetime gifts, those can be smart moves. Using tools like irrevocable trusts, a family can lock in today's higher exemption rates and potentially save millions of dollars in estate taxes when you pass away.

Here comes the caveat. Setting up a trust isn't for everyone. Once your assets are in something like an irrevocable trust, they're essentially out of your control, and there are capital gains taxes to consider, which might not apply to an outright inheritance. That's because you get stepped up basis on an outright inheritance.

Now, with all this, of course, we have the wild card, and that is the 20124 election, where we have the two candidates duking it out for a path to the White House. One, of course, is Kamala Harris, the current vice president of the US, and then Donald Trump, the former president, our 45th president of the United States. Now, if you haven't decided which candidate will get your vote, I want you to consider the following information. This is simply asking you to hear what is headed your way depending on which of these candidates wins the White House.

If the Democrats win the White House, and if Congress were to have majority, then there's a really good chance that we could see changes to the estate tax, and I think it could happen very soon. Vice President Kamala Harris, she really hasn't taken a firm stance on the estate tax. Congress certainly has made us believe that they would take a very aggressive stance towards estate tax reform. That $7 million exemption, that would become the new normal, but it could get a lot worse.

And I say that because people like Senator Elizabeth Warren, they have bills that are calling for a limit of $10,000 per gift and a total annual gift of only $220,000. That's quite different from what we have today. The other thing that Warren's bill calls for is returning the estate tax exemption to just $3.5 million. That could mean real trouble for a lot of estates, and it means a lot more estates. It's going to be double, triple or more if that exemption goes all the way down to $3.5 million.

Lest we forget, our country's debt is more than $35 trillion right now, and each year the annual budget is exceeded by $2 trillion. It grows by almost a trillion dollar every, say, four months. That's insane, and that number is not going to stop. They will gladly let your family's wealth pay for their disastrous spending habits.

Let's talk about former President Trump's campaign, and here's what he's promising, and that is first to make 2017 tax cuts stick. So TCJA would stay in place, and it would include the higher estate tax exemption. In fact, he wants to make it permanent. Repealing the estate tax altogether, that might even be on the table, though I will say that's a bit of a long shot. What you can expect is that some form of estate tax will be in place, but I think it will be a lot better than what we potentially get should the Democrats take control.

So should you make moves now or wait and see what happens? Now, that depends on your situation. We're all different. If you're unmarried with a net worth of $7 million or more, or if you're a married couple with $14 million or more, I think it might make sense for you to start thinking about some planning options. Setting up a trust, it's not a decision that you should be rushing into. These things can cause you a lot of pain, a lot more problems than they're worth, if done incorrectly.

Some families who acted back in 2012, they thought things were going to change. Well, they regretted that, because the predicted changes never happened. A recent conversation I had with a couple, their net worth is around $35 million, and they decided against any type of irrevocable trust simply because they didn't want to lock themselves into a plan that might not be necessary.

So what's my advice? If you're considering major changes to any part of your estate plan, don't wait until the last minute. At least have the conversation. Start talking to your advisor now so that you'll have options when the dust settles. And believe me, there will be a lot of dust, and it will settle. Getting with the right team of people, whether you have them in place or whether you need to find them, starting the conversation is invaluable. That is how you get ahead of these curves.

Thanks for watching We're Talking Money. I hope you found this episode helpful. Don't forget to like, subscribe and hit that bell so you never miss our latest videos. And as always, if you've got questions, please drop them in the comment section below. I'd love to hear from you, and I'll see you next time on We're Talking Money.