Until recently, much tax uncertainty surrounded estate planning. The Tax Cuts and Jobs Act doubled the federal gift and estate tax exemption to an inflation-adjusted $10 million, but only for 2018 through 2025. Fortunately for those with larger estates, in 2025, legislation was signed into law that increases the exemption to $15 million for 2026, with annual inflation adjustments going forward — and no expiration date. This provides more estate planning certainty, but not complete certainty. Lawmakers could still reduce the exemption in the future.

If your estate is large, transferring assets to loved ones or trusts sooner rather than later may be beneficial. It can lock in tax savings should the exemption be reduced in the future.

Building in Flexibility

What if you’re not currently ready to transfer significant amounts of wealth to the next generation? There are techniques you can use to take advantage of the higher exemption amount while retaining some flexibility to access your wealth. Here are two ways to build flexibility into your estate plan:

Spousal lifetime access trust (SLAT). If you’re married, a SLAT can be an effective tool for removing wealth from your estate while retaining access to it. A SLAT is an irrevocable trust, established for the benefit of your children or other heirs, that permits the trustee to make distributions to your spouse if needed, indirectly benefiting you as well.

So long as you don’t serve as trustee, the assets will be excluded from your estate and, if the trust is designed properly, from your spouse’s estate as well. For this technique to work, you must fund the trust with your separate property, not marital or community property.

Keep in mind that if your spouse dies, you’ll lose the safety net provided by a SLAT. To reduce that risk, many couples create two SLATs and name each other as beneficiaries. The arrangement must be planned carefully to avoid running afoul of the “reciprocal trust doctrine,” which could cause the arrangement to be unwound and the tax benefits erased.

Special power of appointment trust (SPAT). A SPAT is an irrevocable trust in which you grant a special power of appointment to a spouse or trusted friend. This person has the power to direct the trustee to make distributions to you.

Not only are the trust assets removed from your estate (and shielded from gift taxes by the current exemption), but so long as you’re neither a trustee nor a beneficiary, the assets will enjoy protection against creditors’ claims.

Balancing Tax Savings with Control

Many other estate planning strategies are available to minimize gift and estate taxes as well as other taxes, such as income taxes, while maintaining your own financial security. Contact the office to discuss what’s appropriate for your particular situation and goals.

An unexpected influx of money (such as from an inheritance, bonus, legal settlement or lottery win) can feel exciting and full of possibility. But without a clear plan, that financial good fortune might not last as long as you’d hoped.

Avoid Common Pitfalls

It can be tempting to immediately buy your dream car or home, which could turn out to be an unwise purchase. Or you might be feeling generous when charities come knocking, only to find out later that they were fraudulent.

You can avoid these potential pitfalls by stashing your windfall in a bank or money market account as soon as you receive it. Waiting at least a month before you touch the money can help prevent impulse buys and other mistakes.

Also, you may owe taxes. Some windfalls, such as lottery winnings and certain legal settlements, are subject to federal tax. This could be at a rate as high as 37% if your windfall pushes you into the top income tax bracket. State and local taxes may apply as well. A tax professional can help you determine what you owe.

Use Your Windfall Wisely

What you eventually decide to do with your windfall will depend on many factors. If you have debt, you’ll probably want to pay it off, especially if it carries a high interest rate and the interest isn’t deductible. Also, establishing or boosting your emergency savings can minimize the need to incur future debt.

Next, consider where you’d like to be five, 10 or 20 years into the future. Develop a budget that will help you move toward your goals, whether that means retiring early, starting a business or something else. You probably shouldn’t quit your job without having thought it through carefully. Few windfalls are large enough to see you all the way through retirement (depending on your age).

Plan for the Long Term

Be cautious about requests for money. Friends and family members may expect to share in your good fortune or may pitch “can’t-miss” investment ideas. Before making any commitments, seek professional advice. Contact our office for help evaluating the tax impact, prioritizing goals and creating a personalized plan to make your windfall last for years to come.

It’s hurricane season, which is just one of several weather emergencies and other natural disasters companies may face, depending on location. Tornadoes, floods and wildfires also pose serious threats. According to the Federal Emergency Management Agency (FEMA), about 25% of businesses never reopen after a major disaster. And many that do reopen struggle to recover.

To lower the risk of closure and improve your chances of a strong recovery, establish a comprehensive emergency plan before disaster strikes. FEMA recommends the following multi-step approach to help safeguard your business.

Set Goals and Assign Responsibility

Start by carefully defining the goals of your disaster plan and identifying who’ll create, manage and execute it. Your priorities will likely include:

• Protecting employees and customers,
• Minimizing damage to assets, and
• Resuming operations as quickly as possible.

For legal and financial risk management, consider including an attorney and an insurance professional to your disaster planning team.

Craft Your Plan

Begin by identifying and prioritizing the risks your business may face. These will likely include physical injuries to employees or customers. Also important to consider are business interruption, revenue loss and damage to property, equipment, inventory or vital records.

Your plan should address:

Employee roles. Assign responsibilities to staff with relevant skills for different emergencies.

Evacuation procedures. Develop clear evacuation routes and protocols.

Safety equipment. Define needs for items such as first aid kits, fire extinguishers and sprinkler systems.

Data protection. Secure vital records and documents by means such as remote backups and physical copies.

Communication strategy. Establish how you’ll keep employees and customers updated as to status and recovery timeline.

Inventory and supplier list. Keep a current list of critical equipment and replacement suppliers.

Operational continuity. Create contingency plans to run essential functions remotely with a minimal team.

HR and payroll policies. Set guidelines for compensating nonexempt employees who can’t work during downtime.

Keep your plan thorough but manageable to ensure it’s practical, updatable and easy to follow.

Put the Plan to Work

To implement your plan, inform employees of their roles, assign responsibilities and provide any necessary training. Ensure that all essential emergency equipment is readily available and that your insurance coverage is sufficient to meet your needs.

Identify possible infrastructure gaps and address them promptly to ensure safety. An example would be inadequate emergency exits.

Do Run-Throughs

Regular practice strengthens preparedness. Conduct drills to ensure safe evacuation procedures are clear and compelling. Verify that safety equipment, data backups and other safeguards function as intended.

Be proactive. Don’t wait for a real emergency to discover weaknesses.

Monitoring and Tweaking

With a solid plan in place, relax, but not too much. Review and update your plan at least annually to reflect changes in staff, operations or layout.

Incorporate feedback from various sources, such as test results, employee input and new risks you’ve discovered or lessons learned. Adapting and refining your plan regularly will maintain its effectiveness and help keep your assets, especially your human assets, safe over time.

Assurance

Your business may never be directly impacted by a severe weather event or other natural disaster. But having a solid emergency preparedness plan can still offer tangible benefits, such as lowering certain business insurance costs. More importantly, it brings peace of mind that allows you to stay focused on running and growing your business, rather than worrying about the possibilities. Contact the office for guidance tailored to your situation.

On July 4, President Trump signed into law the far-reaching legislation known as the One, Big, Beautiful Bill Act (OBBBA). As expected, it extends and enhances many of the tax breaks from the Tax Cuts and Jobs Act (TCJA). It also includes several of Trump’s campaign promises — though many are only temporary — and eliminates tax breaks related to clean energy. Here’s a rundown of some of the main tax law changes to be aware of as you plan for the 2025 tax year.

Highlights for Individuals

• Makes permanent the TCJA’s individual tax rates of 10%, 12%, 22%, 24%, 32%, 35% and 37%,
• Makes permanent the near doubling of the standard deduction, plus for 2025 increases it to $15,750 for single filers, $23,625 for heads of households and $31,500 for joint filers, with annual inflation adjustments going forward,
• Makes permanent the higher child tax credit, plus for 2025 increases it to $2,200, with annual inflation adjustments going forward,
• Temporarily increases the limit on the deduction for state and local taxes (the SALT cap) to $40,000 for 2025, with a 1% increase each year through 2029, after which the $10,000 limit will return,
• Expands the allowable education expenses that can be paid with tax-free Section 529 plan distributions, beginning July 5, 2025, or Jan. 1, 2026, depending on the type of expense,
• Permanently increases the federal gift and estate tax exemption amount to $15 million for individuals and $30 million for married couples beginning in 2026, with annual inflation adjustments going forward,
• For 2025–2028, creates a new deduction of up to $25,000 for tip income in certain industries, subject to income-based phaseouts,
• For 2025–2028, creates a new deduction of up to $12,500 for single filers or $25,000 for joint filers for qualified overtime pay, subject to income-based phaseouts,
• For 2025–2028, creates an above-the-line deduction of up to $10,000 for qualified passenger vehicle loan interest on the purchase of certain American-made vehicles, subject to income-based phaseouts,
• For 2025–2028, creates an additional deduction of up to $6,000 for taxpayers age 65 or older, subject to income-based phaseouts, and
• Eliminates clean energy tax credits, generally after 2025, such as the energy-efficient home improvement and residential clean energy credits — but eliminates the clean vehicle credits for both new and used vehicles after Sept. 30, 2025.

Highlights for Businesses

• Makes permanent and expands the 20% Sec. 199A qualified business income (QBI) deduction for owners of pass-through entities (such as partnerships, limited liability companies and S corporations) and sole proprietorships,
• Makes bonus depreciation permanent and increases it to 100% for qualified new and used assets acquired after January 19, 2025,
• Increases the Sec. 179 expensing limit to $2.5 million and the expensing phaseout threshold to $4 million for 2025, with annual inflation adjustments going forward,
• Permanently allows the immediate deduction of domestic research and experimentation expenses (retroactive to 2022 for eligible small businesses), and
• Eliminates clean energy tax incentives, such as the alternative fuel vehicle refueling property credit and the Sec. 179D deduction for energy-efficient commercial buildings after June 30, 2026 — but eliminates the qualified commercial clean vehicle credit after Sept. 30, 2025.

How Will You Be Affected?

While this list may seem extensive, it represents just a sampling of the tax changes included in the 870-page OBBBA. Contact the office with questions about how the new law will affect you.

If the fringe benefits of your job include employer-paid group term life insurance, a portion of the premiums for the coverage may be taxable. And that could result in undesirable income tax consequences for you.

The cost of the first $50,000 of group term life insurance paid by your employer is excluded from taxable income. But the employer-paid cost of coverage over $50,000 is taxable to you and included in the taxable wages reported on your Form W-2, even if you never actually receive any benefits from it. That’s called “phantom income.”

Have you reviewed your W-2?

If you’re receiving employer-paid group term life insurance coverage in excess of $50,000, check your W-2 to see the impact on your taxable wages. If there’s a dollar amount in Box 12 (with code “C”), that’s the amount your employer paid to provide you with group term life insurance over $50,000, minus any amount that you paid for the coverage. You’re responsible for any taxes due on the amount in Box 12, including employment tax.

The amount in Box 12 is already included as part of your total “Wages, tips and other compensation” in Box 1 of the W-2. It’s the amount in Box 1 that’s reported on your tax return.

What are your options?

If the tax cost seems too high for the benefit you’re getting, ask your employer if they have a “carve-out” plan, which allows certain employees to opt out of the group coverage. If there’s no such option, ask your employer if they’d be willing to create one.

Carve-out plans vary, but one option is for your employer to continue to provide $50,000 of group-term coverage at no cost to you. Your employer could then provide you with an individual permanent policy for the balance of the coverage. Or it could pay you a cash bonus representing the amount it would have spent for the excess coverage, and you could use that money to pay premiums for an individual policy. There would still be tax consequences, but the tax liability might be smaller and the coverage might better meet your needs.

We can help

You may have other tax questions about life insurance. Feel free to contact the office for answers.