Bob's Blasts

Bob's Blast
October 2021

Taxes/Estate Planning
One topic that has come up in many conversations lately is potential tax changes and their impact.  The targets of these potential tax increases appear to be individuals or families with yearly income above $400,000, corporations and large estates.   

With respect to estate planning, one of the main changes being proposed applies to the estate tax exemption.  The tax cuts passed during Trump’s presidency doubled the estate and gift tax exemption ($11.7 million per person in 2021) through 2025, at which time it would revert back down to the pre-tax cut levels. Current proposals are looking to accelerate that reversion from 2025 to 2022, leaving individuals with roughly a $6 million exemption in 2022.   

We have received many questions and emails with concerns about how you may be impacted.  If your assets are below $6 million for individuals/$12 million for couples, there should be no impact on your estate based on current proposals.  You fall below the exemption amount and your heirs would owe no estate tax at your passing.  For anyone with assets above these levels, this may be a good time to reach out to us or your estate attorney to discuss options available before the end of the year to lock in the higher exemption amount.  

Also, anyone with income below $400,000 will probably see no increases to their personal tax rates.  Anyone with income above this amount may want to consider accelerating income into 2021 and pushing deductions into the future.   

While nothing has passed and much uncertainty remains, we will be sure to pass along anything that may impact your situation as things become clearer.   

Open enrollment/insurance  
This is the time of year that many companies update their benefits and allow for changes.  While most of the time it’s easy to just keep things as is, you should always look to see if there is anything new available that might benefit you and your family.  Some things to keep in mind this open enrollment season.  
•    If you are eligible for a Health Savings Account (HSA) and have one available, we encourage you to take advantage and max out contributions if able.  This is one of the only types of accounts that gives you a federal tax break on the contributions and doesn’t tax the withdrawals if used for qualifying medical expenses.   You may also have investment options available within the HSA which could provide long term growth that could help with medical expense down the road.
•    Check for other benefits that may be available besides the typical medical, dental, and vision coverage.  Some companies offer benefits such as HSA’s, flexible spending accounts, long term care insurance, disability coverage, umbrella/additional liability insurance or other benefits that may be worth utilizing.  
•    2021 retirement plan contributions must be made by December 31st.  401k, 403b and 457 contribution limits for 2021 are $19,500 if under age 50 and $26,000 if over age 50.

Markets reminded us in September that what goes up can also go down.  Inflation measures were higher than we have seen in a few years making investors wonder if the Federal Reserve will have to act sooner than expected.  Political bickering continues with proposals of massive spending bills and tax increases to pay for this additional spending.   With Democrats controlling all three branches, we expect to see something done this year but uncertainty remains to what degree.   

Volatility may stay elevated as we move toward the end of 2021.  Remember to control what you can control.  Make sure you have enough money out of the markets for the next 3-5 years of income needs.   Make sure you review all benefit changes to ensure you are maximizing everything being offered to you. If you need to update your estate planning documents, now may be a good time to do so.    

Please reach out if you have any questions or would like to discuss any changes to your employer benefits.      

This material is meant for general illustration and/or informational purposes only.  Views expressed in this newsletter may not reflect the views of Royal Alliance Associates, Inc.  It is our goal to help investors by identifying changing market conditions.  However, investors should be aware that no financial advisor can accurately predict all of the changes that may occur in the market.   This material should not be relied upon as investment advice.  Investors should note that there are risks inherent in all investments, such as fluctuations in investment principal.  Past performance is no guarantee of future results.  There is no guarantee that a diversified portfolio will outperform a non-diversified portfolio in any given market environment. This article contains forward looking statements and projections.  Neither Royal Alliance Associates, Inc nor its representatives provide tax or legal advice.  If you don’t wish to receive marketing emails from this sender, please reply to this email with the word REMOVE in the subject line.