Estate Planning Summary – Year End 2020

Turning Lemons into Lemonade

There is great uncertainty in our country today. Americans are worried about their health and their livelihood. Many businesses are struggling. Although the stock market has recovered in recent weeks, stocks are generally trading at lower values than in 2019 and the day-to-day markets are still unpredictable. Across the board, Americans feel a sense of trepidation about the future.

While it is hard to imagine there could be anything advantageous about today’s uncertainties and depressed asset values, the following factors, coupled with historically low-interest rates, have made it an opportune time to transfer wealth:

  • Depressed Asset Values related to COVID-19
  • Increased Opportunities to take greater discounts on valuations given market uncertainties/li>
  • Low-Interest Rates on intra-family loans (e.g., the current mid-term and long-term rates are 0.35% and 1.0%, respectfully)

Depressed Asset Values, Donald Trump, Estate Planning Summary, Joe Biden, Low-Interest Rates, U.S. Election, U.S. Taxes, Year-End 2020, LemonsAs we all look toward the future and start assessing how we will move forward, it is imperative that you consider your long-term goals regarding your wealth and that you act now. If history has taught us anything it is that both humanity and the economy are resilient. Eventually, things rebound, and those who planned while things were down come out of the struggle stronger and wealthier. 1

As part of your long-term planning analysis, this year’s November election should be kept top of mind, given its possible effects on our future tax laws. In December of 2017, President Trump signed into law the Tax Cuts and Jobs Act (the “TCJA”). Pursuant to the TCJA, as of January 1, 2018, the amount that an individual can transfer to others without being subject to the 40% estate and gift tax is $11.58 million (commonly referred to as the “estate and gift tax exemption”).

The TCJA further provides that effective January 1, 2026; the estate and gift tax exemption reverts to $5M (as indexed for inflation). While Joe Biden has not released information about his specific plans for the estate and gift tax exemption, given his stated desire to roll back the TCJA’s benefits on the wealthy, many analysts anticipate a return to a pre-TCJA estate and gift tax exemption of $3.5 million. Both current law and the possibility of Joe Biden becoming the next president of the United States present a use-it-or-lose-it situation. Failing to use the increased estate and gift tax exemption may very well result in your never having the opportunity to use it at all.

Depressed Asset Values, Donald Trump, Estate Planning Summary, Joe Biden, Low-Interest Rates, U.S. Election, U.S. Taxes, Year-End 2020, LemonadeSo what should you do now? While declining asset values and increased uncertainty make it more difficult to part with assets, both economically and psychologically, if your estate is greater than $3.5 million (or $7M combined for spouses), you should be seriously considering your tax planning right now. 2

Some properly implemented strategies may minimize or potentially even eliminate the 40% tax bite that would otherwise apply had no planning been implemented. Some strategies may allow you to retain access to an income stream that may be estimated or determined before implementing the strategy (minimizing the concern that you may in the future need the assets you parted with today). Some careful planning today could pay hefty dividends tomorrow.

As an example, if you owned an asset (for instance, a retail shopping center) that is worth $10M (based on pre-COVID-19 valuation) that you wish to transfer for the benefit of your children, at the current time you may be able to obtain an appraisal that values the asset at $7M, along with a further discount of 30%. The end result is the ability to transfer a $10M asset, at a $4.9M gift tax value.

Now is the time to consider your current situation – it may very well be the most profitable conversation you ever have. Failure to plan today may result in a complete loss of these unique opportunities as early as January 2021.

We are here to help. Please contact us to discuss how to maximize your unique circumstances.

Feature Photo Credit: Lemonade, Anna Aran via

Joseph McCaffrey
Joseph frequently provides Media Content via Workshops, Podcasts, and Printed Articles on topics like Bitcoin and Cryptocurrency, Wealth Preservation and Planning, Global Banking, and many other high-level financial topics that serve and demonstrate the Value of our Global Network that should be of interest to those who need Private High-Wealth Services.

Joseph also provides strategy and tactics with a bias toward action, including business, tax optimization, and personal solutions for entrepreneurs, closely-held businesses, high net-worth individuals, and their families.

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Joseph McCaffrey a Partner of Morris + D’Angelo, a multi-office, boutique tax, accountancy, and advisory firm heads the San Francisco office. Joseph has over 30 years of experience that enable him to distill complex, ever-changing, real-life challenges into effective “Meaningful” solutions while balancing your business, personal and family goals that draw upon a large network of contacts to help you, wherever you may be.

  1. Photo: Photo: MadAbandon via Flickr

  2. Photo: Photo: Lauren Allik via Flickr

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