Post-Election Opportunities: Preparing for 2025 and Beyond

What the Recent Elections Mean for Your Financial Future

The recent election results significantly change the estate and business tax landscape. With a new administration and a united Congress, potential legislative actions could present unique opportunities for individuals, families, and business owners. Below is an overview of key developments and strategies to consider as you plan for the years ahead.

Potential Legislative Impacts

1. Tax Cuts and Jobs Act (TCJA) Sunset:
   • The TCJA is set to expire on January 1, 2026, unless extended by Congress.
   • Key provisions that could be extended include:
     • Maintaining the current estate tax exemption of $13.61M, avoiding a reversion to $5M (indexed for inflation).
     • Keeping or lowering personal income tax rates and retaining the increased standard deduction.
     • Enacting income-tax exemptions for tips, Social Security income, and overtime pay.
     • Removing the cap on State and Local Tax (SALT) deductibility.
     • Preserving the 20% Qualified Business Income (QBI) deduction for pass-through entities.
2. Corporate Tax Rate Adjustments:
   • A proposed reduction in the corporate tax rate from 20% to 15% could shift the landscape for business structures.
3. Immediate Expensing for Businesses:
   • Proposed policies could allow businesses to expense capital expenditures like equipment and buildings immediately.

Strategies to Consider

1. Maximize Estate Tax Exemptions:
   • High-net-worth individuals should consider leveraging the current high estate tax exemption levels. Establishing and funding trusts, such as Spousal Lifetime Access Trusts (SLATs), can provide flexibility while safeguarding assets from potential future estate taxes.
2. Transfer Business Interests to Trusts:
   • Selling discounted business interests to trusts structured for income tax purposes can be an effective wealth transfer strategy. This approach remains viable under the current administration.
3. Leverage Lower Taxes for Life Insurance Planning:
   • With potential tax reductions, now might be the time to reallocate savings into life insurance policies. Consider converting term policies to whole life or accelerating term rider conversions for enhanced financial security.
4. Harvest Capital Losses:
   • Offset capital gains and potentially ordinary income by harvesting long-term capital losses. Excess losses can be carried forward for future tax years.
5. Review Business Tax Structures:
   • Business owners with pass-through entities (S-Corps, LLCs, Partnerships) should consult their accountants to determine if converting to a C-Corp would be beneficial under lower corporate tax rates.
6. Take Advantage of Immediate Expensing:
   • Business owners should consider making significant capital investments if immediate expensing becomes available. This could include purchasing new equipment or property to enhance operations.

Next Steps

Staying informed and proactive is key to optimizing your financial strategy in light of these potential changes. Work with your financial, tax, and estate planning professionals to identify opportunities that align with your goals and ensure your plans are adaptable to future legislative developments.