Year-End Trust and Estate Planning: What To Do To Close 2024

November 12, 2024

As 2024 draws to a close, it’s important to proactively update your trust and estate plans to reflect your current goals and respond to recent changes in legislation. With impending adjustments in tax law and financial regulations, the end of the year is an ideal time to review your estate strategy. Here are some key aspects of your trust and estate plan to review to prepare you for the new year.

Revisit Beneficiary Designations and Trust Provisions

Significant life events such as marriages, births, divorces, and deaths can have a profound impact on your estate plans. If you’ve experienced any of these milestones, it’s important to update your estate plan’s beneficiary designations on all documents—including wills, trusts, life insurance policies, and retirement accounts—to ensure they accurately reflect your current wishes. Similarly, reassessing the terms of your trusts to reflect changes in your family dynamics or financial situation can prevent future conflicts and facilitate a seamless transfer of assets.

Assess the Impact of the Corporate Transparency Act

The Corporate Transparency Act requires filings by December 31, 2024, for many business owners and individuals controlling legal entities. This act has significant implications for those who have not yet addressed their filing requirements, particularly in how these requirements may affect trusts and other structures. Non-compliance can lead to severe penalties. It’s advisable to consult with your legal advisor to ensure that your business entities and related trust structures comply, including potentially updating bylaws and shareholder agreements.

Prepare for the Estate Tax Sunset

With the current estate and gift tax exemption scheduled to sunset post-2025, taking action before the end of 2024 is crucial. Creating Spousal Lifetime Access Trusts (SLATs), retitling assets, and making gifts can now leverage the higher exemption amounts available. This proactive approach not only utilizes the exemptions before they decrease but also positions your estate to withstand potential challenges from the IRS under doctrines like the reciprocal trust or step transaction doctrines.

Monitor Political Developments and Potential Tax Changes

The results of the presidential election could impact estate tax legislation. Whether it’s potential repeal or the implementation of more stringent tax measures, it’s wise to stay informed and ready to adjust your plans accordingly. Depending on the election results, you may need to accelerate certain actions in your estate plan, such as finalizing transfers or setting up new trust structures.

Review Insurance-Funded Buy-Sell Agreements

The Supreme Court’s ruling in the Connelly case emphasized including life insurance value in business valuations, impacting buy-sell agreements funded by life insurance. Reassess these agreements and the associated estate tax implications to ensure they accurately reflect the current value of the business and the insurance within it.

Prepare for Increased IRS Audits

The IRS has indicated an increase in audit rates for high-income individuals. Now is the time to ensure that your tax compliance is flawless. Engage with your CPA not just for tax return preparation but for a comprehensive review of your planning, record-keeping, and the positions you’ve taken on past returns. Preparing now can mitigate the risk of complications during an audit.

Adapt to New IRA Regulations

The new regulations under the SECURE Act affecting retirement plans, including IRAs, take effect from January 1, 2025. These regulations could impact how retirement benefits are managed in estate planning, particularly concerning trusts that hold retirement benefits. Review these rules with your financial advisor to ensure your plans are aligned with the latest requirements.

Utilize Year-End Gifts

Using annual exclusions for gifts can reduce your taxable estate and benefit your heirs immediately. Consider making these gifts before the end of the year to maximize this year’s exclusions and reduce your overall estate tax burden.

Consult with Estate Planning Professionals

With estate planning becoming more complex and constantly evolving, having a team of skilled professionals like estate planners, CPAs, and financial advisors on your side is becoming increasingly important. Working with a team ensures that every aspect of your estate plan, from tax considerations to family relationships, is carefully reviewed.

Conclusion

As 2024 draws to a close, taking these steps will help secure your financial legacy and ensure that your estate planning keeps pace with personal changes as well as broader economic and legal shifts. Through strategic planning and with the support of professionals, you can navigate the complexities of trust and estate planning, providing peace of mind for you and your family as you move into the new year.

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