I have young kids. As I write this article, Halloween is still a month away, but they’re already bouncing off the walls with anticipation—and a little bit of fear. In many ways, estate planning today feels like wandering through a haunted neighborhood—some houses handing out generous tax treats, others sending chills down your spine with missed filings.
As you and your clients make the rounds of your estate planning neighborhood, let’s take a tour of the five must-visit houses on this spooky estate planning journey and discuss how to turn potential tax scares into sweet savings.
Stop 1: Jerry Powell’s House: Treat of Rate Cuts, Trick of Gifting
- Treat: Fed Rate Cuts
The first house we’re stopping at belongs to Jerry Powell, the chairman of the Federal Reserve. The Fed’s recent rate cuts are one of the biggest estate planning “treats” of 2024, providing an enormous opportunity to act strategically. With lower interest rates, tools like grantor retained annuity trusts allow families to “lock-in” asset values and pass on future appreciation to their heirs with minimal tax impact. By locking in these low rates, clients can secure better financial outcomes for their heirs, much like grabbing a king-sized candy bar early in the night. - Trick: Gifting Dilemma
But watch out for the trick! While lower rates make gifting seem easy here in late 2024, lower rates bring higher asset values. This means the window for locking in lower values before they’re subjected to gift and estate tax is quickly closing. It’s like grabbing a treat that melts too quickly—if your clients aren’t careful, they could be left with a sticky tax mess later.
Stop 2: The IRS House: Trick of Forgetting the 2023 Gift Return
- Trick: Oops, We Forgot the Gift Return
The next house on our tour is the Internal Revenue Service—always ready to trick unsuspecting taxpayers. One common estate planning pitfall is forgetting to file the gift tax return for a gift made in 2023. This might seem like a small oversight, but it can turn into a nightmare if left uncorrected. The IRS has been particularly focused on gift reporting accuracy in recent years, and failure to file could trigger penalties, increased scrutiny or even audits. It’s the equivalent of showing up on Halloween without a costume—the consequences are far more embarrassing and unpleasant than you might expect.
For clients who made gifts in 2023 and haven’t filed their returns, it’s crucial to fix this oversight before Oct. 15. Failing to do so might cause the IRS to revalue the gift, which could lead to increased taxes, penalties or even disputes over the valuation. No wonder this house gets egged every year on Mischief Night. - Treat: Proper Valuation Saves the Day
But here’s the treat—a proper valuation can save the day. The IRS requires gifts to be appraised properly and reported at fair market value. A quality appraisal ensures that clients accurately report their gift’s worth. Doing so reduces the risk of IRS challenges down the road because a client forgot to file or failed to value properly. When clients understand the importance of proper valuations, they can avoid unpleasant surprises and keep their estate plans on track. It’s like coming prepared to a spooky house—you’re ready to handle whatever tricks might be lurking behind the door.
Stop 3: The Year-End Planning Maze: Don’t Get Lost!
- Trick: Waiting Until It’s Too Late
As you and your clients navigate the confusing maze of year-end estate planning, remember that waiting too long to make decisions can be punishing. December is fast approaching. Letting clients procrastinate about their planning can lead to bewitching consequences down the road. As the old saying goes: “Failing to plan is planning to fail.” With holiday distractions and year-end obligations piling up, clients often delay making smart gifting or charitable contributions. By the time they get around to it, they’re stuck rushing through last-minute transactions, risking mistakes or missing out on tax-saving opportunities. - Treat: Make Smart Gift Decisions Now
The treat here is smart gift planning before year-end. Focus on strategies like encouraging clients to use their annual gift exclusions—$18,000 per recipient in 2024—to transfer assets to family members in a tax-efficient manner. Making larger gifts that use up part of their lifetime exemption can be an excellent strategy for clients looking to reduce estate tax exposure. Charitable giving is another powerful tool, especially for reducing taxable income before year-end. The key is to act early and thoughtfully, ensuring that all pieces are in place before time runs out. Helping clients navigate this maze now ensures their estate plans are in top shape and ready for the new year.
Stop 4: Election Night House: Trick or Treat Proposals
Trick or Treat: Candidate Proposals
At this stop, we find the most unpredictable house on the block—the upcoming presidential election. As we approach November 2024, the estate-planning landscape could shift dramatically based on who wins. One candidate may deliver a treat in the form of higher estate tax exemptions; the other could bring a trick with tax hikes and new regulations. One of the most hotly debated proposals is the wealth tax, which has gained traction since the 2020 campaign. In fact, Vice President Kamala Harris has aligned with President Joe Biden’s push for a wealth tax, which would apply a tax on unrealized capital gains. As my Moore v. United States article highlighted, there’s a constitutional pathway to reality here. The implications of this are significant for high-net-worth individuals. A wealth tax could fundamentally alter estate-planning strategies, forcing clients to reconsider how they hold and transfer wealth. Whether it’s a trick or treat, be as prepared as possible for whatever policy changes spring out of the dark.
Stop 5: The TCJA House at 115-97: Full-Sized Candy Bars
- Treat: The Soon-to-Expire Exemption
At house #115-97 on Private Lane (our favorite neighbor), they hand out full-sized candy bars. The Tax Cuts and Jobs Act elevated today’s unprecedented estate tax exemption. Under the TCJA, the federal estate tax exemption is currently at an all-time high—$13.61 million per individual in 2024. But like any good treat, these full-sized bars are running out fast. In just over a year, at the end of 2025, this exemption is set to shrink dramatically, falling to approximately half its current level unless new legislation is enacted.
For clients who’ve been on the fence about making large gifts, now’s the time to act. By using the current exemption, they can pass on substantial wealth to heirs without triggering estate taxes. Missing out on this window is like arriving late to a house that’s out of candy—you’ll leave empty-handed and regret your timing. - Trick: They’re Running Out!
But don’t wait too long—the TCJA’s generous exemption is set to drop dramatically at the end of 2025, like a neighbor who’s running out of candy. Encourage clients to make significant gifts now while the full-sized bars are still available. By transferring wealth today, they can avoid the tax consequences of a much lower exemption in the future.
Collect Your Treats Before They Disappear
Just like a successful trick-or-treat outing, estate planning requires good timing, a realistic route and smart choices. The treats available now—like rate cuts, filing opportunities and gifting strategies—might not last forever. Don’t let clients wait for the election results or the calendar to flip to 2025 to start estate planning. If they do, they could be left with an empty bag or a mouth full of cavities.
Anthony Venette, CPA/ABV is a Senior Manager, Business Valuation & Advisory, with DeJoy & Co., a BDO Alliance firm based in Rochester, New York. He provides business valuation and advisory services to corporate and individual clients of DeJoy.
