Eagle & Fein - August 2020

Eagle & Fein - August 2020

AUGUST 2020

E AGLE A ND F EIN . COM

317-726-1714

The Trust That Could Save Your Clients Millions

Imagine you have a client who has a $12-million estate they would like to leave to their spouse, children, or grandchildren when they pass away. For affluent clients, estate tax is one of the biggest hurdles to overcome when passing an inheritance. Right now, the transference of wealth upon death above the gift and estate tax exemption is subject to an estate tax rate of up to 40%. This means that unless your clients make a bold move now, depending on the value of the estate tax exemption when they die, as much as $2 million of their $12 million may be lost to estate taxes. Here at Eagle & Fein, one of our top priorities is safeguarding the wealth of our clients. This means ensuring that their estates pass to whom they want, the way they want, and with the least amount of tax cost possible. To be sure of the latter, we often recommend to affluent clients that they create a discretionary trust known as a Spousal Lifetime Access Trust (SLAT) and make a one-time gift using the “excess” gift and estate tax exemption. This allows them to bypass gift and estate taxes and leave money to their spouse and children because funds held in a SLAT are technically excluded from their estate. This option will save our clients millions of dollars over the next generation, as the estate tax exemption is scheduled to be reduced and is subject to the political whims of the lawmakers in Washington. The 2020 gift and estate tax exemption is a generous $11.58 million, which is adjusted annually for cost of living. However, the current law provides that this amount is going to be reduced to approximately $6.5 million on Jan. 1, 2026. This policy is called the Sunset Provision. On top of that, the Democratic Party proposed platform aims to eventually reduce the exemption amount to $5 million, or perhaps as low as $3.5 million. If the “pendulum swings” Democrat in Washington after the 2020 election, the reduction in exemption amount may occur as early as 2021. Due to these impending changes, we advise that you be proactive in recommending that your clients act quickly to take advantage of the excess gift and estate tax exemption while it is still available by implementing

a SLAT. The SLAT is a flexible and cost-efficient lifetime planning tool that allows one spouse to establish the trust for the benefit of the other spouse. If your client transfers funds now to the SLAT, your client will be able to safeguard a larger portion of their wealth without incurring gift or estate taxes, and all future appreciation of the assets transferred to the trust will be excluded from your client’s estate. The SLAT not only provides the potential for estate tax saving but also will protect your client’s wealth from your client’s and their spouse’s future creditors, and it will provide for remarriage and bloodline protection if the spouse were to remarry after your client’s death. My team and I always keep a close eye on changes to estate tax laws and the innovative planning strategies to reduce or eliminate the impact of estate taxes. These planning strategies will allow you as a colleague of the firm to stand out in the crowded marketplace. We will continue to keep you current as things develop in Washington. If your clients would like to explore and understand how a SLAT may be added to their estate plan, reach out to our firm today. We can help educate your clients on the benefits of a SLAT and collaborate with you to see if the SLAT strategy is right for your clients.

–Brian A. Eagle

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Why did some companies thrive during the COVID-19 pandemic while others had to shut their doors forever? The answer is simple: Successful companies embraced creative solutions to overcome the obstacles of the shelter-in-place orders. Creativity is key to a profitable business. Innovative problem-solving is how business leaders come up with new ideas, address unexpected issues, and inspire their teams during difficult times. Here are a few habits that resourceful entrepreneurs share. THEY MAKE A SCHEDULE. Though it may sound counterintuitive, structuring your day actually improves your ability to be creative. Establishing a schedule in advance allows you to avoid having to make small, inconsequential decisions. You won’t be distracted by wondering when you’ll get lunch or if you’re missing a big meeting. It’s all already on the calendar. Reducing daily decisions gives you more time to think about what matters and helps you dedicate more of your mental energy to solving problems or refining big ideas. THEY TAKE TIME TO RECHARGE. This doesn’t mean spending all day watching Netflix. Recharging your imagination is an active process. If you’re feeling creatively drained, go to a place that inspires BATTLING MENTAL HURDLES 3 Habits Entrepreneurs Use to Excel During COVID-19

you. This could mean taking a walk around a park, going on a hike in the woods, or visiting your local library. Immersing yourself in others’ ideas can also help recharge your creative batteries. Swing by an art museum, pick up a new book, or treat yourself to a solo movie date. Ask yourself why a particular piece of art inspires you, what makes it worthwhile, and if you would have done anything differently. THEY PRACTICE CREATING. You don’t have to wait for inspiration to strike. Cultivate creativity by making something every day, even if it has nothing to do with your projects at work. Doodle during lunch, sing along to the radio during your drive home, or write a few sentences of a short story each night. Don’t worry about whether these personal projects are “good,” just focus on bringing them into the world. Practice makes perfect. If you believe creativity is something that only a select few are born with, then you might find yourself struggling to be imaginative during difficult times. However, when you view it as a skill that can be strengthened, you’ ll develop habits to see you through what might otherwise be a creative drought.

Conditions Are Ideal for an Estate Freeze. Is It the Right Move for Your Clients?

2. HAVE YOU ACCOUNTED FOR HURDLE RATES? Often, estate freezing strategies come with “hurdle rates” attached. These rates are determined by the IRS and dictate a certain amount of income that needs to be repaid to your taxable estate or to charity. Be sure to consider this in analyzing an estate freeze while interest rates are low. The “hurdle rates” are at record lows, with the long-term federal rate for July 2020 at 1.17% and the Section 7520 interest rate at 0.6%. This means, for most estate freeze strategies, that if the investment being transferred exceeds these rates after the transfer, your client will realize a significant gift and estate tax savings. 3. DO YOU HAVE A STRATEGY AND TIMELINE NAILED DOWN? Every estate plan is different, and laws and rules related to estate planning change constantly. Because of this, it is vital that your clients consider multiple freezing strategies (e.g., gift techniques versus sale strategies) before choosing the one that is right for them. It can be difficult to answer all these questions on your own, which is why we recommend making this decision with the guidance of an estate planning attorney. Our team has the expertise necessary to ensure that when we collaborate with you, we will recommend the right strategic move for your clients. To explore this opportunity further, call us today at 317-726-1714.

This global pandemic may be a blow to your wallet, but 2020 does have its perks: Specifically, this is a prime time to consider new estate planning strategies. As Brian mentioned on Page 1, the gift and estate tax laws are favorable for the moment. That, combined with low-interest rates and asset values, makes this the perfect opportunity for an estate freeze. In the estate planning world, the term “estate freeze” refers to the practice of transferring assets to your beneficiaries without tax consequences. For example, a business owner can restructure the ownership of their company to limit the value of its assets and transfer any future growth to their family. It can be a win-win.

That said, a few questions should be answered before triggering an estate freeze.

1. WILL YOUR ASSETS APPRECIATE? An estate freeze is most valuable for assets expected to appreciate significantly in time. These include stocks and investment properties, among other things. Freezing will protect the appreciation of your assets from the 40% gift/estate tax, so it is only a smart move if your client’s assets are temporarily depressed in value or have a high likelihood of appreciation.

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SUDOKU

Level Up Your Business Succession Planning Expertise

The Eagle Wealth Planning Institute is hosting a series of workshops on business succession planning strategies. This educational series will

Join Our Quest to End Alzheimer’s!

provide you with the tools to assist your clients in planning for the next generation of business owners. Level up your expertise with planning attorneys Brian A. Eagle and Scott J. Linneweber. After attending all four workshops, participants are inducted as fellows to the institute and are invited to attend biannual Eagle Wealth Planning Institute Roundtable events. ‘ESOPS: STRATEGIES TO SELL TO YOUR EMPLOYEES’ Employee Stock Ownership Plans (ESOPs) can offer substantial tax benefits to companies, and company owners can use ESOPs to create a market for their shares when it is time to move on to the next thing. In this workshop, Brian Eagle will discuss how to generate interest in ESOPs among your clients. This workshop will be held Tuesday, Sept. 15, at 8:30 a.m. ‘PREPARING THE BUSINESS FOR SUCCESSION’ Preparing your business for succession is an absolute must, and the earlier in the ownership cycle a business begins to prepare itself for succession the better. Proper succession planning calls for deep consideration and planning. It is the surest way to protect the business’s longevity and future financial success. This workshop will be held Tuesday, Dec. 15, at 8:30 a.m. ‘STRATEGIES TO SELL TO OUTSIDERS’ Emotionally and logistically, selling a business to an outside buyer is complex. From determining your business’s value to getting your books cleaned, this workshop will cover the essential bases necessary before attempting to sell a business to outsiders. This workshop will be held Tuesday, March 16, 2021, at 8:30 a.m. ‘THE LEGACY PLAN: STRATEGIES TO TRANSFER TO FAMILY OR OTHER INSIDERS’ There are multiple options to transfer ownership of a business to a family member or another insider. From adding a partner to owner financing a sale or slow gifting, the right strategy depends on each individual situation. This workshop will be held Tuesday, June 15, 2021, at 8:30 a.m. Please note that due to the COVID-19 pandemic, workshops may be hosted virtually. To register or learn more, contact Melissa Claycomb at (317) 726-1714 or email [email protected].

For the third consecutive year, our team will participate in the Walk to End Alzheimer’s on Saturday, Oct. 3, in Indianapolis. The walk’s goal is to raise awareness and funds for the Alzheimer’s Association’s fight against Alzheimer’s disease. During the walk, there is a Flower Garden Ceremony in which every participant raises a flower that color-coordinates with their connection to the fight. Purple flowers, for example, are for those who have lost someone, orange flowers are for supporters, blue flowers are for those living with the diagnosis, and yellow are their caregivers. Every walk has one white flower raised during the ceremony which represents the first survivor. Join us in the quest to raise the white flower. Every dollar counts in this fight. Over the last two years, we have raised nearly $28,000. You can help! To join our team or donate, visit Act.alz.org/goto/Eagle_and_Fein.

Together, we can end Alzheimer’s.

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INSIDE THIS ISSUE

1 The Trust That Could Save Your Clients Millions 2 Cultivating Creativity to Optimize Efficiency in 3 Steps Is an Estate Freeze Right for Your Clients? 3 Level Up Your Business Succession Planning Expertise Join Our Quest to End Alzheimer’s! 4 Why We Still Need Travel Agencies

THEY CAN LOWER COSTS. Enlisting the help of a travel agency isn’t as expensive as the average customer might think. Travel advisors receive a small commission from airlines and hotels when they book your trip, which allows them to keep your travel costs down. Every agency charges different fees based on the package you purchase, but on average, you can expect to pay around $75 per traveling person for an agent to book your trip. With all the added experiences and deals they can find, this cost easily pays for itself and then some. THEY SIMPLIFY THE COMPLICATED PROCESS. The No. 1 reason people use a travel agency is because planning a trip can be overwhelming. You have to research the location, book flights, plan ground transportation, secure lodging, discover activities, and find restaurants. If you don’t travel often or are going to a destination you’re unfamiliar with, then tackling everything yourself leaves room for mistakes, stress, and disappointment. A travel advisor makes the entire process as simple as possible so you can enjoy your vacation to the fullest.

Once upon a time, you couldn’t plan a vacation without using a travel agent. They would book your flights and hotels, provide information about local activities, and point you to the best sites to see. But with the advent of the internet, it seemed travel agencies would become obsolete. However, these services are actually far from disappearing: Nearly 20% of travelers still use an agency. Because the COVID-19 pandemic changed the way people travel for the foreseeable future, travel advisors, as they ’re now called, are more valuable than ever. THEY GIVE EXPERT ADVICE. If you want to get the most out of your trip, then you should talk to someone who knows exactly how to give you that. Travel advisors undergo training and gain experience with different policies, customs, and travel regulations to get you where you want to go. They will be your go-to experts for what you should do when you get to your destination, especially if you’re traveling to a foreign country or overseas.

GET THE MOST OUT OF YOUR TRIP

WITH THE EXPERT ADVICE

OF A TRAVEL AGENT

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