The Tax Cuts and Jobs Act of 2017 (TCJA) contained provisions affecting the estate tax. Along with several other provisions of the act, these changes are scheduled to sunset in 2025 unless Congress passes further legislation extending them or changing them.

Wealthier individuals and families need to understand what they need to consider moving forward to reduce the impact of these changes.

What Is the Estate Tax?

The estate tax is a tax levied on the estate of a deceased person when it is transferred. It is calculated using the value of the estate before distribution. This is sometimes called a "death tax." For 2024, the exemption amount is $13.61 million per individual or $27.22 million per married couple. This means that there is no tax levied on estates below this value. The tax is not meant to interfere with ordinary people's modest inheritances but rather to impact the wealthy.

The Impact of the TCJA

As a result of increasing house prices, estates are becoming more valuable. Part of the TCJA addressed this by increasing the exemption from $5.49 million per individual in 2017 to $13.61 million per individual in 2024 ($10.98 million in 2017 and $27.22 million for married couples in 2024), gradually increasing over the last 7 years indexed to inflation.

This allowed more wealth to be transferred before triggering the tax, primarily benefitting higher net-worth individuals with estates worth $6 to $13 million or so. It also benefitted people in areas with extremely high housing prices.

Sunsetting Provisions on Estate Tax Exemption

Most provisions of the TCJA, including this one, are set to expire on December 31, 2025. Congress could pass an act to extend this or to replace it with a different tax bill, but if no action is taken, the exemption amount will revert to the pre-TCJA level, adjusted for inflation.

An exact figure is hard to determine, but the best estimate is that it will be somewhere around $6 million for individuals. This change will dramatically impact individuals with a net worth around $6 million and married couples with around $12 million.

Potential Impacts

These individuals and families should brace for potential impacts, which include:

• Increased tax liability. Estates that were not subject to the tax will suddenly become vulnerable, increasing the tax burden on many families.
• Estate planning strategies. High-net-worth individuals and families may want to revisit and possibly revise strategies to consider the lower exemption. Some families that did not have a comprehensive strategy may need to implement one.
• Gift and Generation-Skipping Transfer Taxes. These limits are pegged to the estate tax limit to prevent people from using gifts to avoid the estate tax. You may need to change your strategy.

Estate Planning Considerations

While there is a non-zero chance that the TCJA will be extended, it's best to plan for the very real possibility that it will not. It is absolutely vital that you take the following steps:

1. Review your existing estate plan. Ensure that it aligns with the lower exemption levels and that you take every step to minimize liability.
2. Consider gifting strategies. While the gift tax limits are also going to go down, properly designed gifting strategies can still help reduce tax burdens, especially if done early enough.
3. Consult a professional. It's time to sit down with your tax advisor, wealth advisor, and estate planning attorney to help come up with even better strategies to spare your family a huge tax blow in the event of your death.

Legislative Uncertainty

If nothing changes, then the estate tax provision will sunset. There is a fair amount of conflict about what Congress should do. In general, Republicans believe in extending the cuts to benefit Americans, but many Democrats are concerned about the deficit, including President Biden.

Whether anything will be done may, in part, depend on the results of the November election. For now, it is best to plan for the assumption that nothing will change.

The sunsetting of the TCJA's provisions regarding estate tax is significant for many high-net-worth individuals and families. You should be taking steps now to protect your family from an elevated tax burden. For professional advice to develop a comprehensive estate planning strategy, contact CrossleyShear today.

While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of RJFS, we are not qualified to render advice on tax or legal matters. You should discuss tax or legal matters with the appropriate professional.

The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. Any opinions are those of CrossleyShear and not necessarily those of Raymond James.

When it comes to investing, one monster looms over investors: the "what-if monster." This monster is all those thoughts that keep you up at night as you think about the worst-case scenarios and fear that if one thing goes wrong, your entire investment strategy could be at risk.  Doubt is normal, but it isn't always helpful. The what-if monster can be debilitating and make it hard for investors to have confidence.   

With investment portfolio diversification, however, any investor can transform their relationship with the what-if monster and feel prepared for the ups and downs of the market. 

What is Diversification and Why is It Important?

Diversification simply means creating a mix of varied investments, ensuring that investors do not put all their eggs in one basket. That means making sure your asset mix includes stocks, bonds, and short-term investments and then aligning to your investment time frame, financial needs, as well as your comfort level with volatility. Working with a financial planner allows you to review and discuss different levels of risk and return potential and ensure you feel confident with your investment strategy. As your assets grow, periodic redistribution of your assets is essential to ensure your portfolio remains balanced and diversified.

 Diversification

• Spreads out and reduces risk
• Mitigates unsystematic risk (it doesn't help if the entire market collapses)
• Allows you to choose more investments
• Preserves your capital
• While it can sometimes result in lower returns, it comes with a significant reduction in risk.

How to Ensure Your Portfolio is Properly Diversified

It's best to seek the help of an expert to ensure you minimize your risk and maximize your return. Here are some things we can help with to let you build a resilient portfolio to support your long-term success:

1.     Investment research. While you may get some enjoyment from doing this yourself, an expert can help you find opportunities you might not have thought of, spot red flags, and make the best decision. We can also help you find investments that fit your personal values.

2.     Portfolio diversification strategies. Portfolio diversification strategies vary depending on your investment horizon and risk tolerance. We can help you pick the right strategy to support your short- and long-term needs. You should also diversify across industries and take into account disruption.

3.     Monitoring and Rebalancing. No portfolio can sit there, untouched. Monitoring your portfolio and making changes to deal with world events, market changes, and exciting new opportunities can be almost a full-time job. We can help you keep an eye on your portfolio and make adjustments, rebalancing as needed. Also, if you find watching your stocks makes you anxious, don't worry, we can handle it for you.

4.     Behavioral guidance. Some people chase shiny stocks. Others are so risk-averse they miss opportunities. We can help you learn to find a good middle path, developing a long- term financial plans built to withstand the inevitable ups and downs of the market.   

5.     Tax efficiency. Finally, we can help you manage your portfolio in ways that minimize your tax burden. We can help you decide how much to put into long-term funds for the future, how much to keep liquid, and when the best time is to withdraw money.

Quieting the "What-if Monster"

A diversified investment portfolio helps focus on your time, energy, and resources and what you can control and let go of what you cannot. Reach out and schedule an appointment with us. The what-if monster lives in every investor, but you can reduce the chatter of this monster by having us create a diversified portfolio, thoughtfully put together to weather market fluctuations.

Every investor's situation is unique and you should consider your investment goals, risk tolerance and time horizon before making any investment. Prior to making an investment decision, please consult with your financial advisor about your individual situation. You should discuss any tax or legal matters with the appropriate professional.

The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. Any opinions are those of Evan Shear, CFP® and W. Dale Crossley, Jr., JD, CWS® and not necessarily those of Raymond James.

Enjoy a memorable summer vacation without breaking the bank.

Vacation Planning: 10 Budgeting Tips for a Memorable Summer

Everyone loves a summer vacation. It should be a carefree time spent basking in the sun with your favorite people. What you rarely hear about (but many experience) is the financial stress of summer overspending. Fortunately, this stress can be avoided with just a little forward vacation planning and budgeting strategy.

If you want to enjoy your fun in the sun without worrying about your finances, we're delighted to share a few budgeting tips and financial planning advice to help you prepare for summer expenses. Vacation, travel, leisure activities and summer shopping should be carefree. Let's make it that way together.

1) Set a Realistic Budget

Take the time to calculate how much you can afford to spend on summer vacation or your favorite leisure activities. Your goal is to have a good time and perhaps maintain a few treasured summer traditions without putting your financial stability at risk. Consider your income, savings, and any financial obligations that might impact your plans.

Put a number on your summer budget so that you have a concrete place to start for affordable summer plans.

2) Plan Ahead for Summer Fun

Don't just jump into summer adventures. Last-minute and tourist prices have a convenience mark-up. Instead, plan ahead. Determine the cost of the vacations and activities you want to do and how much you can save by planning ahead. Booking early, packing a picnic, and checking the cost of tickets can help you plan an affordable vacation and will help you avoid overspending.

Don't forget to look for deals, discounts, and off-peak times to save money.

3) Track Your Expenses

Keep track of how much you spend in the lead-up to your vacation and during your trip. Keep notes on your phone to help you stay within budget. You'll quickly notice areas where you really want to overspend (budget more for these next summer) and areas where you can cut back to make room for those oh-so-satisfying impulse buys.

4) Prioritize What Makes You Happiest

Your summer budget will go much further if you prioritize the aspects of summer fun that make you the happiest. Consider what is most important to you, the activities and purchases that are the most satisfying, and what you want to do during the summer. Once you have a list of priorities, you can cut things that don't make you as happy. For example, you might cancel your streaming accounts while on vacation or skip the fancy restaurants for delicious taco stands and beachside ice cream.

Allocate your budget toward what makes you the happiest and will make your summer successful.

5) Save for Summer in Advance

Start setting aside money for summer fun in the months leading up to your desired vacation. Saving $100 a month for several months can accumulate into a tidy sum to plan your vacation and summer adventures. Set up a separate savings account and consider automatic transfers to help you save consistently and build up a summer nest egg for carefree festivities.

6) Look for Cost-Effective Options

Look for opportunities to save. There are tons of budget-friendly alternatives to the overpriced core-tourist options. Book a room in an older historic hotel that's a little off the beaten track. Book a few months ahead to save on peak season prices. Consider the most affordable methods of transportation on your vacations. You might stay in a rental property instead of a hotel, use public transportation instead of renting a car, and take advantage of free or low-cost activities.

Hint: Museums, aquariums, and other low-key downtown attractions are often very affordable and within walking distance of one another.

7) Limit Discretionary Spending

Cut back on non-essential expenses leading up to your vacation. You can motivate yourself by envisioning the fun things you will buy with the money you don't spend on extra streaming, restaurant food, or impulse shopping. Every time you don't spend, reward yourself by putting the unspent dollars into your summer savings account and watching your vacation budget grow.

8) Vacation Planning Hack: Use Rewards and Discounts

Use rewards and discounts. Save rewards points on your credit card for groceries and gas. Build up loyalty points with your favorite retailers to spend on summer vacation clothes and supplies. Use your memberships to get discounts on their summer sales. A little strategic rewards management can really help lower the cost of vacations and leisure activities.

Hint: Before booking tickets, become a loyal member of any airline or hotel you book with. Membership is often free and opens the door to discount opportunities, lounge access, and extra services during your vacation.

9) Pack Wisely

Pack essentials and items you'll need on the trip. Make a list before you go to ensure that you don't have to purchase missing items (like sunscreen) at inflated tourist prices at your destination.

Also, use packing hacks to pack your summer gear tightly to avoid extra baggage fees. If you're going to a souvenir shop, leave room in your suitcase for extras.

10) Be Flexible With Vacation Planning

Planning ahead and building an affordably fun agenda is great! But don't forget to keep an open mind about opportunities. Adjust your plans based on your budget and financial situation as the summer approaches. Maybe there will be an emergency expense, or maybe you'll spot a super-cheap local water park and skip the expensive theme park tickets. Be ready to make changes to get the most value and stay within your budget along the way.

Start Your Summer Vacation Planning Now!

By following these tips and being mindful of your spending, you can enjoy a memorable summer vacation and leisure activities without breaking the bank. For more financial tips to enrich your life and empower your plans, you can rely on CrossleyShear Wealth Management. Contact us today!

Navigating Medicare decisions in tricky situations

What encore careers, young dependents and early retirement mean for your elections.

Medicare is an important component of holistic financial planning, but it can get complex for investors who retire early, care for young dependents or work beyond 65. But knowledge is power. Being aware that your unique situation should influence your Medicare choices is half the battle.

Tips for common scenarios

Not everyone retires right at 65. In fact, it’s becoming more common that people are making their own rules and timelines when it comes to retirement.

If you’re planning to retire before age 65, think about how you plan to bridge your healthcare coverage until you become eligible for Medicare. Medicare is designed for those 65 and older or people with certain disabilities. The only way to ensure healthcare coverage before that date is with private health insurance through your employer or the exchange.

What if you decide you’re working past the age of 65 (the Medicare eligibility point), and you’re not sure if you should enroll in Medicare yet? You can drop your employer’s healthcare plan and enroll in Medicare, but first you should consider the out-of-pocket costs associated with doctor’s visits and procedures. Many people will enroll in Medicare Part A, which is hospital insurance, because there's no premium for most people, as long as they have 10 years of Medicare-covered employment. But to enroll in Part B and simultaneously carry group health insurance is like paying double.

What if you’re married and cover your spouse on your employer’s plan? Medicare is individual healthcare coverage, so your spouse would either need to be eligible for Medicare or have their own private health insurance.

Let’s say you have young dependents at home. Maybe they’re your own kids you had later in life, or maybe you care for your grandchildren or other dependents. While Social Security offers benefits for young dependents, Medicare doesn’t. Your dependents would need their own healthcare insurance plans.

Keep up with changes

Regardless of the Medicare decisions you make, you should revisit your selections every year. Open enrollment starts annually in October, which is the time to review what works for you and your family.

Sometimes changes are made to the program or laws that get passed affect Medicare. An example is the Inflation Reduction Act that was passed by Congress in 2022. It doesn’t go into full effect until 2025, but it will reduce out-of-pocket costs for everyone from $7,000 to $2,000 for drugs. It also caps out-of-pocket insulin at $35 per month, which is significant for those with diabetes.

If you need a little bit more guidance with your Medicare decision-making, the first point of contact is Medicare.gov. That site offers a ton of information, including how to enroll. Of course, you can enlist your trusted advisor to help you navigate these important decisions as part of a holistic financial plan as well.

As you consider your Medicare elections:

• Determine if any of your dependents will need to switch to an individual healthcare plan.
• Speak to your advisor about your holistic financial situation to determine what makes the most sense.

Sources: aspe.hhs.gov

The information contained in this report does not purport to be a complete description of the healthcare issues referred to in this material. This material is being provided for information purposes only and is not a complete description, nor is it a recommendation.

Links are being provided for information purposes only. Raymond James is not affiliated with and does not endorse, authorize or sponsor any of the listed websites or their respective sponsors. Raymond James is not responsible for the content of any website or the collection or use of information regarding any website’s users and/or members. Raymond James does not provide tax or legal services. Please discuss these matters with the appropriate professional.

RMD rules delayed for inherited IRAs...again?

What the latest change can mean for some beneficiaries

If you’ve recently inherited an IRA or are set to inherit one soon, you need to know that the rules surrounding IRA inheritances have become more complicated for some designated beneficiaries. Most notably, a “10-year rule” applies to most non-spousal beneficiaries who receive inherited retirement accounts. This rule requires that beneficiaries of IRAs must liquidate the entire account by the end of the 10-year anniversary of the IRA owner’s death. However, proposed Treasury regulations require that beneficiaries under this 10-year clock, who inherit from an IRA owner who died after their Required Beginning Date, to take annual Required Minimum Beneficiary Distributions (RMBDs) in years 1-9. These proposed regulations have left taxpayers unsure if they’re required to follow them and take an annual RMBD.

What’s going on

The 10-year rule went into effect for most non-spousal beneficiaries who inherit IRAs after December 31, 2019. Most industry professionals believed that the 10-year rule only required the account to be fully distributed by the end of the 10th year, without annual distributions. But a proposed 2022 regulation added a required minimum beneficiary distribution to the equation for a subset of IRA beneficiaries: specifically, designated beneficiaries who inherit from an IRA owner who died after their Required Beginning Date. These beneficiaries will have to make an annual RMBD. If you an inherit from an IRA owner who died before their Required Beginning Date, only the 10-year rule applies, but there’s no RMBD.

RMBDs require you to withdraw funds at a specified amount and if not taken, penalties will apply. Since the 2022 proposed regulations took taxpayers and industry professionals by surprise, the IRS has issued penalty waivers for those individuals possibly affected by the proposed regulations, which also gives the IRS more time to issue final regulations.

How we got here

Beginning with the SECURE Act of 2019, the IRS applied stricter distribution rules on those inheriting IRA accounts by implementing a 10-year rule for most non-spouse beneficiaries, significantly reducing the distribution timeframe.

In February 2022, the IRS proposed an additional regulation that would impose both a 10-year rule and RMBDs on anyone who inherited an account from someone who was already past their own required beginning date.

It’s not difficult to see the problem: The IRS released proposed regulations in 2022 that applied to a group of beneficiaries that inherited them in 2020 and later. It also left taxpayers wondering if they need to follow proposed regulations or wait until final regulations are issued. This resulted in the IRS waiving penalties for RMBDs not taken in 2021 and 2022. On July 14, 2023, the IRS announced that inheritors who didn’t take RMBDs in 2023 will also receive penalty waivers, since the proposed regulation hasn’t been finalized yet as we head into 2024.

What you should do

If this all sounds confusing, that’s because it is. If you inherited an IRA after December 31, 2019 and you’re unsure if or how this applies to you, meet with your financial advisor – and perhaps also a tax professional – to review your situation. They can tell you how to comply with the new rules and how to factor those pesky RMBDs into your long-term financial plan.

Sources: keiter; kiplinger; kitces; putnam wealth management

Raymond James does not provide tax advice. Please discuss these matters with your tax professional. RMD rules delayed for inherited IRAs...again?

Links are being provided for information purposes only. Raymond James is not affiliated with and does not endorse, authorize or sponsor any of the listed websites or their respective sponsors. Raymond James is not responsible for the content of any website or the collection or use of information regarding any website’s users and/or members. Raymond James does not provide tax or legal services. Please discuss these matters with the appropriate professional.