For business owners, professionals, and families with sizable savings and income, tax rules are about as favorable as they’ve been in decades, but the tax policy pendulum could swing back again. Now is the right time to consider if a tax policy swing back would be a sudden financial blow.
The Tax Cuts & Jobs Act, which went into effect in 2018, approximately doubled the lifetime tax exemption on gifts and is scheduled to ratchet higher through 2025. At the end of 2025, the tax exemption falls off a cliff!
2025 is supposed to be the date when you use or lose the large estate and gift tax exemption on family wealth transfers.
If everything went along as scheduled under current law, you wouldn’t hit that use it or lose it moment until the end of 2025! However, if tax policy were to shift in 2020 or 2021 — which is a real possibility — then you could be on the precipice of paying millions in tax estate and gift tax much sooner than expected.
If tax policy changes, business owners, professionals and individuals will be forced to make major decisions about wealth transfers to loved ones much sooner than expected. It’s wise to start considering the impact a sudden shift in tax policy would have on your personal situation.
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Douglas Finley founded Finley Wealth Management, a Fee-Only Registered Investment Advisor, with the goal of creating a firm that eliminated the conflicts of interest inherent in the financial planner – advisor/client relationship. The firm specializes in financial planning and investment management for high-net-worth individuals and families.
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