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2020 Tax Guide & App | The SECURE Act – Rethinking Tax Planning Strategies

The only constant is change 

Below is the link to our 2020 tax guide which includes a QR code/link to download the Tax Guide App.  The Tax App is not just informational, there are calculators on several topics to include:  RMD’s, marginal tax rates, estate tax liabilities and social security benefits.

2020 Tax Guide

A few items to be aware of for 2020: 

  • The new inflation adjusted federal estate tax exemption is now $11,580,000.  
  • A married couple can now shelter over $23 million of assets before they would have federal estate tax exposure. 
  • The federal laws are going to lower the exemption amount to $5 million in 2026. 
  • Do not forget about state estate or inheritance taxes. 

Does your client’s resident state have an estate or inheritance tax when they die? 

Some advisors are unaware of the planning that can be done to reduce or eliminate a client’s state estate tax.  Below is a link to a piece from Prudential that reflects legal maneuvering to reduce or eliminate these state taxes.  You can implement certain strategies to make sure the tax doesn’t hit at the first death for a married couple. 

The Impact of Estate and Inheritance Taxes on a Client’s Estate Plan

For certain clients you might utilize an “Annuity Arbitrage” strategy to reduce or eliminate the tax.  This is a two-step strategy where a client annuitizes some or all assets above the state limit.  Using a straight life income option assures the estate value will be lowered by the annuitized amount upon death.  Then you use life insurance owned outside the taxable estate as a “wealth replacement” vehicle.  This strategy can reduce/eliminate the estate taxes and leave tax-free assets to heirs while increasing the cash flow of the annuitant. 

Learn more by reading our NEW Integrated Insights™- Estate Maximization with Annuity Arbitrage.

Stretch IRA is eliminated

The new SECURE Act removes the ability to stretch an IRA beyond 10 years after death.  This will cause us to look at other strategies for those with unneeded IRA’s that will ultimately be inherited.  The new law allows a client to defer withdrawals until age 72 which will help build a larger balance at death.  

Our Integrated Insights™- Stretch Reality reflects a strategy that may be more powerful if you want to maximize what the heirs get.  Our Insight was designed under the previous IRA laws and still reflects age 70 ½ for the first IRA distribution.  Once updated software is available, we can change the first withdrawal to age 72.  The age 72 withdrawal doesn’t likely change the outcome here.  It will build a larger IRA balance but then have more to tax when you die. 

It makes sense to explore this option more often for larger unneeded IRA accounts and perhaps for those who have most of their investable assets in an IRA. 

Integrated Insights™- Stretch Reality

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