This week, Warner partner Mark Harder, chair of the Private Client and Family Office Practice Group, presented an estate planning update at the 2020 FOX Family Office Forum.
This annual 3-day program for family office executives and professional advisors offers presentations and peer discussions on topics relevant to the current challenges family office leaders are facing. The forum, hosted by the Family Office Exchange, was held virtually this year rather than in person, but the format did not impact the usefulness of the content and peer discussions.
Mark and Jamie Sanders of the international accounting firm RSM US LLP co-presented on “Top 10 things to consider before year end.” During their presentation they offered the following planning suggestions for family members and their advisors to consider and discuss.
- Reserve your professional advisors’ time as soon as possible. Their time is booking up with year-end planning, and many advisors take time off during the holidays to be with family.
- Top off existing gift trusts and create new gifts to utilize unused estate and generation-skipping (GST) exemptions while they are still higher than usual (currently $11.58 million per person).
- Create spousal limited access trusts (SLATs) to utilize unused estate and GST exemptions.
- Form grantor retained annuity trusts (GRATs) while the 7520 rate is low (0.4% in September and October 2020) and they are still permitted.
- Refinance intra-family loans to take advantage of the current really low applicable federal rates (AFRs).
- Think creatively about income tax planning this year:
- Evaluate the viability of accelerating gains into 2020 and deferring deductions until 2021.
- Evaluate whether to exit opportunity zone projects.
- Consider Roth conversions.
- Consider unique charitable planning opportunities:
- For example: Low AFRs make charitable lead annuity trusts (CLATs) very attractive for long-term appreciable assets, and they work around itemized and charitable deduction limitations.
- Prepare for the new comprehensive IRS audit program targeting high net worth taxpayers:
- Don’t wait - document those files and get your documents organized now.
- Have and follow a document retention policy.
- Deal with valuation risk:
- Consider formula clauses.
- Check swap powers and use them to make sure appropriate assets are in the appropriate vehicle:
- Make sure to consider income tax basis planning in your estate planning conversations.
During his presentation, Mark challenged attendees to work with family members to “Think carefully, and plan intentionally, creatively, and flexibly.” Mark also noted that the election driven, year-end planning occurring now is good estate planning that in most cases should be done regardless of how the election turns out. He also noted that despite the uncertainty about future tax policy due to the upcoming election, now is the right time for family offices and advisors to help families think deeply about what their estate and tax planning should look like and make the needed changes.