Be Prepared clothespin business strategy and motivational concept
As we step into 2025, the theme for estate planning is: Be Prepared. With significant regulatory, economic, and industry changes on the horizon, preparation is not just advisable—it is essential. This year brings a myriad of challenges and opportunities that demand proactive engagement from clients and their advisors. Below, we explore the key developments shaping the landscape and the steps you should consider navigating them effectively.
Corporate Transparency Act: Reporting Compliance
The Corporate Transparency Act (CTA) requires many entities to file detailed reports regarding their beneficial ownership. For those engaged in sophisticated estate planning, understanding this requirement is critical. The uncertainty on whether or not to report to FinCEN comes from the on again, off again, requirements and preliminary injunction from the Texas Top Cop Shop v. Garland case in the Fifth Circuit.
Steps to Prepare:
- Audit Your Entities: Review all trusts, LLCs, and other entities to identify which ones are subject to CTA reporting.
- Gather Documentation: Ensure accurate records of beneficial ownership and comply with reporting deadlines.
- Consult Professionals: Work with legal and tax advisors to confirm the status on required filings.
Non-compliance can lead to steep penalties and increased regulatory scrutiny, making this an urgent priority for 2025, but filing when not required risks exposing sensitive client information needlessly.
Tax Landscape: Sunset of the 2017 Tax Cuts and Jobs Act
The scheduled sunset of the 2017 Tax Cuts and Jobs Act (TCJA) presents a dual scenario: the possibility of tax cuts expiring or being made permanent. Each path presents unique challenges.
Steps to Prepare:
- Leverage Current Exemptions: With estate and gift tax exemptions potentially halving after 2025, consider strategies like lifetime gifting to irrevocable trusts and Grantor Retained Annuity Trusts (GRATs).
- Stress-Test Plans: Review existing estate plans under both high- and low-exemption scenarios.
- Stay Agile: Ensure plans are flexible to accommodate legislative changes without requiring substantial restructuring. Documentation should be drafted and ready for execution, if it is necessary to make gifts irrevocable to take advantage of the existing law.
Wealth Management Industry Consolidation
The wealth management industry continues to consolidate, with larger firms acquiring smaller players. This trend may affect the availability and personalization of advisory services.
Steps to Prepare:
- Evaluate Relationships: Assess the stability and alignment of your current wealth management team with your long-term goals.
- Explore Alternatives: Consider boutique advisory firms or multi-family offices for personalized attention.
- Expand Your Team: Add specialists such as tax attorneys and trust protectors to create a robust advisory network.
Potential Economic Downturn
Economic uncertainty remains a concern, with potential impacts on asset valuations, liquidity, and income streams, especially where assets are held in trust.
Steps to Prepare:
- Stress-Test Portfolios: Evaluate how market volatility might impact estate liquidity and funding for obligations like taxes or charitable bequests.
- Utilize Defensive Strategies: Consider creating or funding trusts that shield assets from creditors or market fluctuations.
- Revisit Asset Allocation: Ensure investment strategies align with both personal and estate planning objectives.
Emerging Trends in Digital Assets and Technology
The rise of digital assets and “death tech[1]” platforms is reshaping estate planning. Platforms enabling online estate planning are becoming more accessible, while the growth of cryptocurrencies and digital memorabilia necessitates updated planning approaches.
Steps to Prepare:
- Incorporate Digital Assets: Ensure estate plans include provisions for cryptocurrencies, online accounts, and digital memorabilia.
- Leverage Technology: Use modern estate planning platforms to streamline processes and enhance client engagement.
- Secure Digital Legacy: Work with advisors to establish clear instructions for managing digital assets after death.
- Consider alternative disposition: Consider alternatives to traditional funeral and burial including virtual funeral, water burial, memorial diamonds or jewelry and so on.
Increasing Charitable Bequests
High-value charitable bequests are on the rise, driven by philanthropic desires and tax planning strategies. With larger donations becoming more common, integrating charitable giving into estate plans can reduce tax liabilities.
Steps to Prepare:
- Explore Charitable Trusts: Consider creating Charitable Remainder Trusts or donor-advised funds.
- Review Tax Implications: Analyze how charitable contributions can impact estate taxes and distribution.
- Document Intentions: Clearly define charitable goals to ensure they align with family and legacy objectives.
Legislative Changes to Local Death Tax
Proposed changes to inheritance tax rules, including potential alterations to relieve the death tax burden on local business and agricultural assets, may significantly impact estate planning strategies.
Steps to Prepare:
- Stay Informed: Monitor legislative developments affecting inheritance tax laws.
- Plan for Changes: Adjust strategies to account for potential changes in reliefs or thresholds.
- Consult Experts: Work with estate planning attorneys to mitigate risks and capitalize on opportunities.
Proactive estate planning is not just about preserving wealth—it is about positioning yourself and your family to adapt and thrive amidst change. As you prepare for 2025, consider these additional steps:
- Education: Stay informed about regulatory and legislative changes through webinars, seminars, and consultations.
- Regular Reviews: Schedule bi-annual reviews of your estate plan to ensure it remains aligned with your goals.
- Scenario Planning: Use tools such as Monte Carlo simulations or scenario modeling to anticipate various outcomes and plan accordingly.
The year ahead promises complexity but also provides an opportunity to refine and future-proof your estate plan. With the right preparation, you can ensure that your strategies are resilient, compliant, and optimized for success.
Conclusion
In 2025, the theme for estate planning is simple: Be Prepared. By addressing regulatory compliance, legislative uncertainty, industry consolidation, economic shifts, and emerging trends head-on, you can safeguard your wealth and secure your legacy. Engage with your advisors now to turn this year’s challenges into opportunities.
[1] Death Technology can be both technology associated with final disposition, such as burial, cremation or alternatives, and technology associated with end-of-life planning. See