As we approach the end of 2024, it’s an ideal time to revisit your tax and estate planning tasks. With many items to address, it’s prudent to take action sooner rather than later. When reviewing year-end estate planning or business transition strategies, consider important factors like gift giving and tax implications.
Here’s a checklist of items to evaluate as the year comes to a close and you plan for the future:
Federal Gift Tax Exemptions: The federal gift tax exemption is currently at a historic high. These exemptions are "use-it-or-lose-it" opportunities with year-end implications. Now is also the time to consider valuation discounts for closely held business interests.
Key assets to evaluate for 2024 gifting include:
Planning Timeline: Remember that substantial lifetime gifts require careful planning, so start the process early. For more insights on creating a legacy through gifting, check out Capital Press’s commentary on the topic. It’s particularly crucial if you intend to make gifts by year-end.
Upcoming Changes: As we look to 2025, keep in mind that the historically high federal estate and gift tax exemption is set to expire unless Congress acts. The exemption was temporarily doubled in 2017 and will revert to around $7 million in 2026 if no changes occur, adjusted for inflation. If you want to discuss strategies to maximize the current exemption, please reach out.
Year-End Considerations: As the year closes, assess your estate planning for potential changes, including estate and gift tax exemptions and possible tax reforms.
Opportunities for Charitable Gifts: There are numerous ways to make impactful charitable contributions that can lower your tax liability. If you plan to donate before the year ends, refer to our Tips for Planning Charitable Giving.
Discuss Potential Changes: With uncertainties surrounding future tax regulations, individuals and business owners should consult tax and estate planning experts regarding possible adjustments to:
Opportunities Ahead: The remainder of 2024 and into 2025 presents significant opportunities for business transitions. The mergers and acquisitions market is slowly improving, although many companies still face challenges due to high interest rates and regulatory scrutiny. However, businesses with strong financials or unique market positions remain attractive to buyers, including private equity firms eager for acquisitions.
Seller Preparedness: Sellers who are ready for extensive due diligence are more likely to close successful transactions. The structure of deals often hinges on tax implications, making advance planning essential.
Key Employee Transitions: There’s an increasing trend toward transitioning businesses to key employees. These plans can maintain the business's legacy but require careful financial consideration. Written transition plans can help businesses capitalize on opportunities when they arise.
Compliance Requirements: The Corporate Transparency Act took effect on January 1, 2024, requiring most small businesses to file information about their entities and beneficial owners with the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN). Entities formed before 2024 must file by December 31, 2024, while those created in 2024 have a 90-day window. Businesses should assess whether this Act applies to them and consult with legal counsel for compliance guidance.
In conclusion, there is much to consider at year-end with regards to tax planning and estate planning. If your circumstances have changed, and you need to update your documents, give us a call.
