The Wealth & Wisdom Blog

A few weeks ago, President Biden introduced proposed legislation under the name of the “American Families Plan” (“AFP.”)  In this month’s update, I wish to summarize the appropriateness, or perhaps the double-meaning, of the name of the American Family Plan legislation.  If the AFP is enacted, certain taxpayers should consider gifts to other members of the taxpayer’s family, or perhaps gifts to favorite charities, thereby benefitting other American families.  There are many uncertainties about the AFP proposal, including the opportunities that wealthy taxpayers might have to liquidate highly-appreciated assets ahead of the effective date of any legislation.  For now, I wish to draw your attention to how two tax proposals, if enacted, would impact gifting decisions.

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“Dad, it’s so cold outside. Why can’t we live in a warmer state like Grandma and Grandpa?”

This past week, a few of my clients called me from their winter residences in Florida and Arizona.  In addition to their own estate planning matters, we discussed the significant temperature differential between our respective locations.  On a somewhat related note, Governor Walz recently announced his proposals for state estate tax and income tax changes.  In this month’s advisory update, I summarize a few of the Governor’s proposals and provide a brief comments as an estate planning practitioner.

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“Our new constitution is now established and has an appearance that promises permanency; but in this world nothing can be said to be certain, except death and taxes.”  Benjamin Franklin’s letter to Jean-Baptiste Leroy, 1789.

For many of us, the end of the calendar year could not come soon enough.  Between the social unrest, political turmoil, the COVID-19 pandemic, and the economic and societal upheaval created thereby, few of us will shed any tears for the end of the 2020 calendar year. Looking ahead, many clients and fellow advisors lament the lack of certainty surrounding government institutions, the future of tax laws, and perhaps the economic outlook.

In this time of uncertainty, I encourage our clients to make decisions based upon the certainties of life, decisions based upon their faith, their love for their families, and their charitable endeavors. Over this past year, I have been honored to help some clients make significant lifetime gifts.  Some clients have helped with an adult child’s unexpected living expense costs, other clients with educational costs of their grandchildren, and other clients with the establishment of charitable strategies. While tax law changes might impact the tax efficacy of such lifetime gifting decisions, I am certain that none of the clients that I assisted this past year with significant gifting matters will regret their gifting decisions, given that these decisions were ultimately driven by non-tax considerations.

Keeping in mind that tax rules are likely to change in the coming years, we should plan on the following tax rules going into 2021:

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Do your givin’ while your livin’ so your know’n where its goin’.  Unknown Poet and Estate Planner

Many of my clients share with me their pleasure in seeing their family use and enjoy gifts made by them. Whether it is paying for a nice dinner out with the family (remember those days?), a vacation adventure with the grandkids, or even paying some of a grandchild’s staggering educational costs, my clients generally feel that making such significant lifetime gifts are a good use of hard-earned assets.  For my part, I am glad to remind them of the tax planning benefits of making such lifetime gifts. In last month’s update, I provided a brief overview of the policy position of Biden and Trump and how those positions would impact estate planning.  Ahead of the tax law changes I believe to be on the horizon, this month’s update provides a brief summary of “annual exclusion gifts.”

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