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Estate Planning in 2020 and Beyond
1. Estate Planning
in 2020 and BeyondRachel Ziegler
Ziegler Legal Services LLC
(781) 328-9212
rachel@zieglerlegalservices.com
www.zieglerlegalservices.com
2. Estate Planning Essentials
Mistakes and Misconceptions
• Simple Will only.
• Joint titling, Pay on Death (POD), or Transfer
on Death (TOD) accounts in lieu of an estate
plan.
• Assuming children will “take care of it”.
• Leaving out the children of the first marriage
when planning with a second spouse.
• No planning for state estate taxes.
• Wrong beneficiaries of retirement accounts.
Planning Documents
• Durable Power of Attorney
• Health Care Proxy
• Living Will (may include end-of-life
instructions and organ donation wishes)
• HIPAA Authorization
• Will
• Revocable Trust
3. Trusts
Revocable Trusts
(aka intervivos or living trusts)
• Avoid probate
• Estate tax planning for married couples in
Massachusetts
• Coordinate and facilitate asset disposition
after death
• Hold assets for beneficiaries for years or for
life
• Donor controls during his/her lifetime
• Can be managed for Donor by Trustee during
incapacity
• Simplifies estate administration
Irrevocable Trusts
• Estate tax savings
• Creditor protection
• May own life insurance policies
• May receive and own gifts for children and/or
grandchildren
4. Estate Taxes 101
Federal
• Law changed by Tax Cuts and Jobs Act,
December 2017
• Estate tax exemption is $11.58M
• Tax rate is 40%
• Exemption is “portable”
• TCJA sunsets in 2025, and exemption falls
back to $5M (adjusted for inflation)
• Estate tax exemption is reduced by lifetime
taxable gifts (“unified credit”)
Massachusetts
• Not affected by TCJA
• Estate tax exemption is $1M
• Tax rate is variable, up to 16%, depending
upon size of estate
• $1M is a threshold for filing (not a true
exemption)
• Exemption is not portable
• *NY exemption is $5.85M.
• *CT exemption is $5.1M. CT has a gift tax.
5. What you need to know about Estate Taxes
• Estates taxes can be significant. Good planning is worth it.
• Federal estate taxes now impact a small number of estates. But that
may change!
• Planning for state estate taxes is important. Don’t neglect it!
• Simple Wills are not good planning for estate taxes in Massachusetts.
• If you live in Massachusetts, married, with assets >$1M, you should
have Revocable Trusts with estate tax planning to minimize
Massachusetts estate taxes. This is a very common planning strategy.
6. Strategy for Planning: Revocable Trusts with
Estate Tax planning
Trusts should be designed to:
• Make use of both spouse’s exemptions to minimize overall estate taxes due at the
second death.
• Make use of marital deduction to defer all estate taxes until the death of the
surviving spouse.
• Marital deduction is unlimited, for U.S. citizens.
Documents should be flexible, to accommodate future changes in the
law and exemption amounts.
7. Strategy for Planning: Lifetime Gifting
• Annual exclusion gifts (up to
$15K per donor, per year)
• Medical/education exclusion
• Pay tuition directly!
• “Taxable” gifts. Gifts in
excess of the annual
exclusion. Use exemption,
but don’t pay gift taxes.
• How to make gifts?
• Outright (directly to the
beneficiary)
• In trust (held for his or her
benefit)
Why make gifts to an Irrevocable
Trust, instead of outright?
• Beneficiary is a minor, disabled,
or spendthrift.
• Protect assets from beneficiary’s
creditors.
• Protect assets if the beneficiary
divorces.
• Asset management for the
beneficiary.
• Ensure assets pass to future
generations as you wish.
• Estate tax savings for future
generations.
Worried you might need the
money? Consider these
alternatives.
• Make annual exclusion
gifts each year, as long as
you can.
• Spousal Lifetime Access
Trusts (SLATs)
• Gifting at end of life
(“deathbed” gifts)
8. Strategy for Planning: Charitable Giving
Charitable Giving during Lifetime
• Cash
• Appreciated/low basis marketable securities
• Donor Advised Fund
• Qualified Charitable Distribution to public
charities from IRAs
Charitable Giving at Death
• Give to named charit(ies) or charities in
general
• Donor Advised Fund
• Name charity as beneficiary of retirement
account
Charitable Remainder Trust
• Annuity paid to individual beneficiary,
remainder to charity.
• Use to sell appreciated asset, avoid gain
recognition on sale.
Charitable Lead Trust
• Annuity paid to charity, remainder to
individual beneficiary.
9. Recent Update – SECURE Act
• Passed December 19, 2019. Pre-COVID.
• Eliminated the “Stretch IRA” for many beneficiaries.
• New rule requires all assets to be withdrawn within 10 years of owner’s death.
• May be huge income tax consequences.
• 3 types of beneficiaries:
• “Eligible Designated Beneficiaries”
• Still eligible for lifetime payout.
• Who are EDBs? (i) Surviving spouse; (ii) Disabled or chronically ill beneficiary; (iii) Minor child
of owner (not minor grandchild!); (iv) Beneficiary less than 10 years younger than the owner
(e.g., a sibling).
• Conduit/see through trust for an EDB also eligible for lifetime payout.
• “Designated Beneficiaries” – everyone else – get 10 year payout.
• “Non-Designated Beneficiaries” (estates and non-qualifying trusts) get 5 year payout.
10. Planning and Strategies – SECURE Act
• Don’t leave your retirement account to a non-designated beneficiary (your estate or non-
qualifying trust).
• If Trust is the beneficiary, make sure it qualifies. It may need an update.
• Be careful with accumulation trusts or trusts for multiple beneficiaries.
• Leave retirement accounts to EDBs, and other assets to DBs.
• Consider a Roth conversion.
• Leave your retirement account to charity or to a Charitable Remainder Trust (CRT).
• Increased the age at which RMDs are required to age 72.
• Eliminated age limit on deductible IRA contributions.
• Qualified charitable distributions from IRAs (up to $100,000) are still permitted if over
70½, but are reduced by contributions after age 70 ½.
11. Recent Update – CARES Act
• Passed March 27, 2020 to provide COVID related assistance to
individuals and businesses.
• Waived required minimum distributions (RMDs) from retirement
plans for 2020 (and for 2019 if not taken before January 1).
• Allowed 2020 RMDs already taken to be returned, by August 31.
• Allowed penalty free distributions or loans from retirement accounts
in some cases.
