I love the “Fast and Furious” movies with the cars, close calls, crazy stunts and explosions everywhere – it’s an escape from real life. Unfortunately, in the real world of estate planning, we have law changes coming at us fast and furiously. Here’s what you need to know:
The Trust Company of Tennessee
Don’t fall off the estate tax cliff! Over 99% of the population is not affected by the federal estate tax, which is a tax on assets transferred at the time of your death. Currently, the amount in assets that can be transferred estate tax free (the exemption) for any one person is $13.61 million or $27.22 million per couple.
If the estate tax applies to you, it applies at a rate of 40% on the amount over and above the exemption and is due within nine months of your death. Generally, there is a marital deduction for assets left to your spouse so that it isn’t due until after the second death for a couple. Unless something changes in the law, the current exemption amount ends on Dec. 31, 2025, known as “the cliff,” since as of Jan. 1, 2026, the exemption will revert to $5 million per person increased for inflation, which is expected to be about $7 million per person or $14 million per couple for 2026.
Unfortunately, you lose the current exemption if you don’t use it, so what can you do? If you are concerned you might pay estate tax based on the 2026 numbers at the time of your death, there could be options that you can put in place NOW to take advantage of the current higher exemption. Contact The Trust Company of Tennessee or your estate planning attorney to discuss and review your options. We recommend you act soon, because estate planning attorneys will be busy in the next few months assisting their clients affected by this change.
Watch out for Corporate Transparency Act (CTA) careening around the corner! The CTA requires certain entities that are registered to do business, such as limited liability corporations and limited partnerships, to file personal information regarding their beneficial owners with the U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN). Certain entities are exempt, generally including large operating or public companies, exempt entities and those regulated by other federal or state agencies. This means most small, closely held entities are required to file.
Any new entity that registers or has changes in ownership in 2024 must file in 2024, but any entity existing prior to 2024 has until Jan. 1, 2025, to file. If you have an entity that is registered to do business, we recommend that you touch base with your attorney to determine if you must file. The determination of what must be filed may be complicated depending on your personal situation.
Our most important recommendation is do not wait; discuss these issues with your advisors as soon as possible to be prepared since these deadlines are coming at us fast and furiously.