Diversified

We use the idiom “straws in the wind” when some small indicator or event might serve as a portent that something more significant may be in store down the road. 

Of course, there are never any guarantees, and soothsaying as to final outcomes from meagre beginnings may prove totally off-base as to the ultimate meaning of early signs.

Because the process for passing a tax bill is so arduous, all the uncertainties apply to the straw thrown into the current political whirlwind around Washington, D.C., last week when House Republicans offered their proposal for what is officially titled The One, Big, Beautiful Bill.

Of immediate concern here is only that small part of its 389 pages that would make permanent the current high federal gift and estate tax lifetime exemption starting at $15,000,000 per taxpayer in 2026, then indexing it for inflation each year thereafter – rather than reducing it by 50% on January 1, under the law’s current sunset provision.

Better than a sharp stick in the eye and the longest journey must begin with one step – but that journey is long. The final form must pass the House, then go to the Senate who will propose its own version followed by passage of a final agreed upon bill – with all the cutting, pasting, and compromising along the way.

But high-net-worth clients must be reminded in the small amount of time remaining, that the legislative uncertainty doesn’t matter for planning purposes if they follow this course that offers the best of either outcome:

1. Establish a third-party recipient (usually a common irrevocable grantor trust).
2. Loan property equal to one or both (if married) of the high exemption amounts to the trust.
3. Then decide later, depending on the final tax bill, whether to call the loan and get the property back (if the high exemptions remain in place), or forgive the loan converting the transfer into an untaxed gift (if the sunset will occur).
4. If converted to a gift, proper planning can allow for ongoing maximum control over the property and even (if married) to access to the transferred property.

We can help with preliminary explanation and consideration of the planning issues that will be raised by legal and tax advisors. The best conversation starter with a client is to request an estate tax estimate based on their net worth, the state of legal residence, marital status, and an anticipated rate of net worth growth. With that information we can generate the easy-to-understand calculations for presentation in just 24 hours (well, maybe 36!).

Give Tom Virkler a call at 706-614-3796 or tom@cpsadvancedmarkets.com.

For What It’s Worth:  Having straws in the wind should not be confused with being three sheets to the wind, a saying used to describe someone who is extremely drunk, comparing their situation to a ship in a storm whose lines have broken on three of its sails resulting in the loss of control and the headway of the vessel – although one has been known to cause the other.