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"Financial Planner's Corner" is a periodic series sharing advanced financial planning techniques, foundational planning principles, practice management tips, and more. What To Have On Your Tax Radar For 2024 [Christine Benz, Morningstar.com]
"[Ed Slott]: Even the IRS said a few years ago, let’s say, [the federal estate tax exemption] is $13 million; I’m just rounding it off. Let’s say you use the whole $13 million now. So, the question [that] came up is, 'Well, what if it goes back to $7 million or so? Will you have to claw back what you took out?' Because the exemption—we call it an estate exemption, but it’s also a gift exemption. You can use it during life. If you already used it, IRS has already said, 'We’re not going to claw back. You can use it now.' In essence, what IRS is saying is use it or lose it. So, you may want to look at ways to start gifting funds out to lower your estate. A sneaky way to lower your estate is to do a Roth conversion, especially a large Roth conversion, because the tax you’ll pay will come out. Obviously, you’ll have less money. Your estate could be lower, and the beneficiaries get the benefit of inheriting a Roth, plus you have no RMDs for the rest of your life. But you should look at reducing your estate if you feel that when it goes back to half—and I don’t know if it will, but it’s supposed to in 2026—think about ways, you have two years now, to reduce your estate. And there’s so many easy ways to do it. Without fancy estate planning or trusts or anything, you can just give money away each year, annual exclusions, you can give money away, make direct unlimited gifts for medical or tuition, and you can use the exemption itself during life. So, you don’t have to do anything fancy." The Real Reason Your Midsize Firm Isn't Growing [Angie Herbers, ThinkAdvisor] "All these challenges lead us back to intellectual capital. Who on your team can make sure the right implementation happens? We have to keep in mind that the firm owner or owners already have plenty on their plate handling day-to-day operations. Carpenters like to say that they measure twice and cut once, to avoid wasting wood as well as time. The same principle applies to advisory firms. Unless owners have the capital to invest in extra talent, they must prepare well and then handle the heavy lifting of implementation. There’s no doubt that it’s the hardest stage of the process. Firm owners often hope that the playbook that got them to the middle tier of the industry takes them to the next level. But what they really need is to ask for more help and to embrace a data-driven, more tightly focused leadership style. In other words, substantially expanding their leadership abilities is often the answer." ICYMI: Avoiding Client Power Of Attorney (POA) Rejection By Taking A Comprehensive ‘Kitchen Sink’ Approach [David Haughton, Nerd's Eye View] "An increasingly important aspect of estate planning involves 'digital assets'. In many instances, clients may have created their POAs before the concept of digital assets was fully appreciated. Therefore, the document may not even contemplate that a fiduciary may need to access online accounts or other electronically stored content as part of managing the incapacitated person's affairs. An increasing number of states have adopted the Revised Uniform Fiduciary Access to Digital Assets Act (RUFADAA), which lays out the statutory framework for dealing with digital assets. The RUFADAA requires explicit authorization in the applicable legal document for a fiduciary to access a person's electronic communications. Therefore, a generic POA (or an old one) may be missing specific language empowering the agent to access certain digital assets, making such access legally prohibited by this statute. Which is why it is increasingly critical in today's information age, where digital assets and electronic communications are increasingly integral to personal and financial affairs, to explicitly provide an agent with the specific power to access these electronic communications. This inclusion ensures that the agent's authority is comprehensive and adapts to the evolving digital landscape, covering all critical aspects of asset management and decision-making on behalf of the principal." Employee Or Independent Contractor? DOL Issues New Guidance [Bryan Strickland, Journal Of Accountancy] "The new economic reality test calls for employers to consider six factors when determining whether a worker should be treated as an employee or independent contractor, without any 'predetermined weight' given to any one factor:
New Law Could Reduce RMD Rules For Annuitized Annuities - But Proper Valuation Is Needed [Ian Berger, IRAHelp.com] "However, there’s a big problem: To use the new rule, the RMD for the annuitized part must be calculated using the usual rule (prior-year 12/31 account balance divided by the owner’s life expectancy factor). But that requires a valuation of the annuity as of the prior 12/31. The annuity provider is supposed to report the fair market value of annuities annually on Form 5498. However, once an annuity is annuitized, that doesn’t always happen. It’s possible the IRS will allow valuations to be obtained in other ways, but there hasn’t been any guidance on that yet. So, unless the insurance company can provide a proper valuation, it would be risky to use the new RMD rule." Here’s A Way To Delay Some RMDs—And Put Off Your Tax Bill ($) [Joanne Cleaver, WSJ.com] "The 500-hours rule means that an older worker could continue formally as an employee, working independently on projects or seasonally, and postpone the RMD from that employer’s 401(k) plan. Doing this would allow more money to accrue in your 401(k), likely boosting your monthly income when you do take RMDs. It could also buy a saver time to convert some other savings to Roth IRAs or otherwise plan distributions to minimize the overall tax impact. Strings are attached to this potential latitude, says Margaret Berger, a partner in the law and policy group at Mercer, a financial-services firm that specializes in work and retirement matters. An older worker can delay taking the RMD only on the assets contained in the 401(k) offered through their current employer, Berger says. While that could include money from prior employers’ 401(k) plans that is rolled into the plan of your current employer, it wouldn’t apply to plans still administered by former employers. And the delay in RMDs wouldn’t apply to other types of tax-deferred accounts, such as traditional IRAs." Tim Steffen: Smart Tax Moves For 2024 And Beyond [Christine Benz & Jeffrey Ptak, The Long View] "In terms of the timing on that [potential TCJA sunset legislation], presumably that happens sometime toward the latter half of 2025, December seems to be a popular time for Congress to finally pass things that will apply for the next calendar year. It’s possible it could even drag into 2026 and then be made retroactive to the beginning of the year. What we’re all fairly confident on is that nothing is going to happen in 2024, with it being an election year, I think everybody just wants to ride out the election, see who is in charge in Washington come January of 2025. And from there, we’ll have a better sense of exactly what might happen with this. The one thing we can all agree on is that no one wants to be the party in charge when a large tax increase happens. So, presumably, regardless of how the election works out, there will be some sort of compromise on these sunsetting provisions and not everything will happen exactly as it’s planned."
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