Are You Prepared for the Changes that are Quickly Approaching?
A number of factors seem to be conspiring to change the current dynamics that American families face, and these factors are a return to (and combination of) some of the worst characteristics of the nation’s most negative economic periods from the past.
Federal Personal Estate and Gift Tax Exemption
First, in 2017 Congress adopted the Tax Cut and Jobs Act (TCJA) – one of the changes this legislation made was to increase the federal personal estate and gift tax exemption from $5.5 million to just over $11 million (now $12.92 million with inflation). However, most provisions of the TCJA, including the increase of the estate tax exemption, will sunset at the end of 2025, and this will have a significant (and surprising) impact on many families. It’s estimated that nearly 60,000 more families will be subject to the federal estate and gift tax when this provision sunsets, and a divided Congress and Presidency make it much less likely that the federal government will be able to agree on a way to avoid this imminent change.
High Inflation, Supply Chain Issues, and Increasing Wages
Second, high inflation, supply chain issues, increasing wages, and other economic factors are squeezing small operating companies, and making it harder for them to create profit, expand services, or hire new employees. As a result, the value of small operating businesses (even profitable ones) is starting to plateau.
Increases in Interest Rates
Third, increases in interest rates that are aimed at reducing inflation make it much harder for both ordinary Americans and business owners to borrow money, making it more likely that an overall economic slowdown will occur, and further increasing the chance that many businesses and personal investment accounts will see a decrease in their value.
What is to Come?
In short, a slowing economy, stagnating business valuations, and a wider estate tax net, will lead to an extremely difficult landscape (and a significant increase in possible estate tax obligations) for tens of thousands of Americans.
However, by acting now, many people may be able to turn the tables and find ways to protect their assets and efficiently pass on their family’s wealth despite these dire factors.
Over the upcoming months, Legacy Counsellors will be introducing and presenting a series of continuing education courses, blog posts, short videos, and other materials, all aimed at helping you understand the current situation and future changes we’re likely to see, and to suggest practical ways to take advantage of some of the opportunities created by this environment.