2019 Year-End Tax and Estate Planning Update
As 2019 comes to a close, Attorney Matt Schippers notes the following for year-end 2019 tax and estate planning:
1. Retirement Account Contributions
The 2019 contribution limits for retirement accounts are $19,000 for a 401(k) and $6,000 for an IRA. Taxpayers who are 50 years of age and older may make catch-up contributions of $6,500 to a 401(k) and $1,000 to an IRA. Contributions to IRAs are subject to certain phase out limitations. Under the Tax Cuts and Jobs Act (the “Act”),
all taxpayers are allowed to convert a traditional IRA into a Roth IRA.
2. Standard Deduction and Itemized Deductions
The Act increased the standard deduction, which for 2019 is $12,200 for single taxpayers and $24,400 for married filing jointly taxpayers. Consequently, fewer taxpayers may itemize their deductions. Taxpayers who itemize their deductions should consider the Act’s increased limitation of the charitable contribution itemized deduction to 60% of adjusted gross income (AGI); and the Act’s cap of the state and local tax itemized deduction (for state and local property tax and state and local income tax or sales tax) at $10,000 per year.
3. Annual Gift Tax Exclusion
The Act doubled the estate and gift tax exemption for estates of decedents dying and gifts made after 2017 and before 2026. The 2019 exemption, indexed for inflation, is $11.4 million per individual. Individual taxpayers should also consider the annual gift tax exclusion, which is $15,000 per year per donee for 2019. Any gift to a donee in excess of $15,000 made by an individual taxpayer will reduce that taxpayer’s $11.4 million estate and gift tax exemption.
4. Estate Planning Review
Individuals may also consider revisions to their estate plans at 2019 year-end or as 2020 begins. The Last Will and Testament should be reviewed to ensure that executor and guardian appointments are appropriate. Similarly, Durable and Health Care Powers of Attorney should be reviewed to confirm proper agents are selected in the event of the principal’s incapacity. Individuals may consider whether a Revocable Living Trust, coupled with a pour-over Last Will and Testament, may be implemented in their estate plan as a probate avoidance device or to address estate tax exposure. As part of the estate planning review, beneficiary designations on bank accounts, life insurance policies, and retirement accounts should be considered. Ultimately, the estate plan should carry out the individual’s intent as to fiduciary appointments and property transfers.
A summary should not be considered legal advice. For specific questions about tax and estate planning, contact the Tax Attorneys and Estate Planning Attorneys of TWG.
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