Category: Estate Planning

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The 10 Biggest Recent Tax Law Changes for High-Income Households

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In our previous articles, we have said that the One Big Beautiful Bill Act (OBBBA) represents one of the most significant tax law updates in years. While the legislation contains hundreds of provisions, several changes are particularly relevant for high-income households, including business owners and families with substantial estates.

Below are ten of the most important changes and the planning conversations they may trigger.

1. Greater Certainty for Long-Term Tax Planning

A major theme of OBBBA is permanency. Several provisions that were previously temporary have now been extended indefinitely. This includes:

  • pass-through deductions
  • estate tax exemptions
  • certain business deductions

Planning opportunity:

Greater certainty allows families and business owners to build long-term tax strategies with fewer sunset concerns.

2. TCJA individual tax rates made permanent

The Tax Cuts and Jobs Act (TCJA) passed in 2017 lowered top federal income tax rate to 37%. Instead of reverting to higher pre-2018 rates, the OBBBA makes it permanent, providing greater long-term planning certainty.

Planning opportunity:

Years with temporarily lower taxable income may still present opportunities to:

  • convert portions of traditional IRAs to Roth IRAs
  • reduce future required minimum distributions
  • leave tax-free assets to heirs

3. The 20% Pass-Through Income Deduction Is Now Permanent

The Internal Revenue Code Section 199A Qualified Business Income deduction allows many business owners to deduct up to 20% of pass-through income. Before OBBBA, this deduction was set to expire after 2025.

Planning opportunity:

Business owners may want to revisit –

  • S-corporation salary strategies
  • entity structure decisions
  • income timing strategies

4. Expanded Tax Benefits for Qualified Small Business Stock

The law enhances the tax advantages under Internal Revenue Code Section 1202 Qualified Small Business Stock (QSBS). Changes include:

  • Tiered capital gains exclusion
    • 50% exclusion after 3 years
    • 75% exclusion after 4 years
    • 100% exclusion after 5 years
  • Higher exclusion limit
    • Increased to $15 million
  • Expanded company eligibility
    • Asset threshold increased to $75 million

Planning opportunity:

For founders or investors expecting a business exit, entity structure and stock issuance timing may significantly affect future taxes.

5. Immediate Deduction of Domestic R&D Costs

The law restores immediate deductibility of domestic research and development expenses under Internal Revenue Code Section 174. This reverses the previous rule requiring five-year amortization.

Planning opportunity:

Technology firms, engineering companies, and innovation-driven businesses may benefit from improved cash flow and faster tax deductions.

6. More Favorable Interest Deduction Rules

Changes to Internal Revenue Code Section 163(j) increase the allowable deduction for business interest expenses. The formula once again resembles EBITDA rather than EBIT, allowing many leveraged businesses to deduct more interest.

Planning opportunity:

Real estate investors and private business owners may benefit from re-evaluating financing strategies.

7. Changes to Energy and Clean-Technology Credits

Several energy-related incentives are being phased out over the coming years. Credits affected include those related to:

  • electric vehicles
  • energy-efficient buildings
  • clean energy infrastructure

Planning opportunity:

Households and business owners planning energy projects may want to review timelines to capture remaining credits before phase-outs occur.

8. Higher Estate and Gift Tax Exemptions Made Permanent

One of the biggest changes affects estate planning. The law makes the historically high federal estate tax exemption permanent under Internal Revenue Code Section 2010. For 2025 and beyond:

  • Individuals can transfer roughly $15 million+ estate-tax-free
  • Married couples can transfer $30 million+

Without legislative action, the exemption was previously scheduled to drop roughly in half after 2025.

Planning opportunity:

Families may still benefit from strategies such as spousal lifetime access trusts (SLATs) or dynasty trusts to lock in exemption and protect assets from estate taxes in future generations.

9. Estate Planning Strategies Still Matter

Even with higher estate exemptions, many high-net-worth families still benefit from thoughtful planning using tools such as:

  • irrevocable trusts
  • dynasty trusts
  • lifetime gifting strategies
  • charitable planning

Planning opportunity:

Proper structuring can help families reduce estate taxes, protect assets, and preserve wealth across generations.

10. Expanded 529 Education Savings Plan Flexibility

Effective January 1, 2026, the federal 529 plan distribution limit for K–12 education doubles from $10,000 to $20,000 per beneficiary per year. Qualified withdrawals remain federal income tax-free. The $20,000 annual limit is per student (beneficiary), not per family. Also, the OBBBA significantly expanded the definition of qualified K–12 education expenses. In addition to private school tuition, qualifying expenses may now include:

  • Certain educational therapies and services for students with disabilities (subject to the statutory rules)
  • Tuition at public, private, or religious schools
  • Curriculum and instructional materials
  • Books
  • Online educational materials
  • Certain tutoring expenses
  • Fees for standardized tests
  • Dual-enrollment fees

Planning opportunity:

If you’re planning for private school, the combination of a 529 plan (up to $20,000/year of tax-free qualified withdrawals), and your state’s eligible education savings account could substantially reduce your family’s out-of-pocket education costs.

In summary, the One Big Beautiful Bill Act introduces significant tax changes affecting affluent households, and business owners. While many provisions provide new opportunities, their impact depends heavily on your:

  • income level
  • business structure
  • estate size
  • investment strategy

A coordinated approach between your financial professionals and attorneys can help ensure these changes are incorporated into your broader wealth plan.

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3 Estate Planning Moves You Need to Consider Now

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Summer break is often a good time to review financial goals, and family priorities. It can also be an important opportunity to revisit your estate plan—especially in light of recent tax law changes. While estate planning strategies vary from family to family, the following three moves are commonly worth reviewing now or before the end of the year.

1. Review Your Estate Tax Exposure

The federal estate and gift tax exemption under Internal Revenue Code Section 2010 remains historically high. For many families:

  • Individuals may transfer over $15 million free of federal estate tax
  • Married couples may transfer over $30 million

Even with these higher limits, estate taxes can still be relevant for families with significant real estate, closely held businesses, or concentrated investment portfolios. Review whether your current estate plan still aligns with:

  • your net worth
  • projected asset growth
  • potential future estate tax exposure

2. Use Your Annual Gift Tax Exclusion

Each year, individuals can give assets to others without triggering gift tax reporting under Internal Revenue Code Section 2503. These gifts can be made to children, grandchildren, and other family members. For 2026, the annual exclusion allows gifts of approximately:

  • $19,000 per recipient
  • $38,000 per recipient for married couples

Over time, consistent gifting can reduce the size of a taxable estate while helping younger generations earlier in life. Consider whether year-end gifts could support:

  • education funding
  • home purchases
  • long-term investment accounts

3. Consider Funding or Updating Trusts

Trusts remain one of the most powerful tools for managing wealth across generations. Trusts can also help protect assets from creditors, divorce risk, and spendthrift behavior. Common trust strategies include:

  • revocable living trusts for probate avoidance
  • irrevocable trusts for estate tax planning
  • lifetime discretionary trusts for asset protection
  • dynasty trusts designed to preserve wealth across generations

Review whether existing trusts should be:

  • funded with additional assets
  • updated to reflect changes in family circumstances
  • aligned with current tax law

Estate planning is not a one-time event. As tax laws, family situations, and financial circumstances evolve, periodic reviews are absolutely critical in ensuring your money passes to the right beneficiary in an tax efficient way as you intend to.

Now is a good time to coordinate with your financial advisor and estate attorney to confirm that your estate strategy remains aligned with both current tax rules and your long-term family objectives.

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Top 5 Planning Moves for Small Business Owners Now

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The One Big Beautiful Bill Act (OBBBA), which was signed into law last year, represents one of the most significant tax law updates affecting entrepreneurs in years. While many provisions target large corporations, several changes create new opportunities for small business owners to reduce taxes, improve cash flow, and plan for future growth.

Below are five planning moves business owners may want to discuss with their financial advisors.

1. Re-Evaluate Your Entity Structure

The Internal Revenue Code Section 199A Qualified Business Income deduction — commonly known as the 20% pass-through deduction — is now permanent under OBBBA.This deduction applies to income from:

  • S-corporations
  • Partnerships
  • LLCs taxed as partnerships
  • Sole proprietorships

Because the deduction was previously scheduled to expire after 2025, many owners delayed structural decisions. Now that it is permanent, this may be a good time to review:

  • S-corp vs LLC tax treatment
  • Owner compensation strategies
  • Profit distribution planning

For many businesses, optimizing the 20% deduction can meaningfully reduce lifetime tax liability.

2. Consider Whether Future Growth Favors a C-Corporation

OBBBA expanded the benefits associated with Internal Revenue Code Section 1202 Qualified Small Business Stock (QSBS). If your company is structured as a C-corporation, qualifying stock may allow shareholders to exclude a large portion of capital gains when the business is eventually sold. New rules provide:

  • 50% gain exclusion after 3 years
  • 75% exclusion after 4 years
  • 100% exclusion after 5 years

The lifetime gain exclusion limit was also increased to $15 million. For founders building a high-growth company with an expected exit, the potential tax savings from QSBS could be substantial.

3. Accelerate Research and Development Spending

Recent tax law changes had required businesses to amortize research and development expenses over five years, which reduced the tax benefit of innovation spending. OBBBA restores the ability to deduct domestic R&D costs immediately. This is particularly valuable for companies investing in:

  • software development
  • engineering and product design
  • manufacturing innovation
  • technology development

Immediate deductions can improve after-tax cash flow, which may allow growing companies to reinvest more capital back into the business.

4. Revisit Your Financing Strategy

The law also adjusts the interest deduction limitation under Internal Revenue Code Section 163(j). The deduction calculation now again resembles EBITDA rather than EBIT, which generally increases the amount of interest businesses can deduct. This change may benefit businesses that rely heavily on financing, including:

  • real estate companies
  • capital-intensive businesses
  • companies funding expansion with debt

If your business uses leverage, reviewing your capital structure may uncover opportunities to improve tax efficiency.

5. Take Advantage of Workforce-Related Tax Credits

OBBBA expands several employer tax incentives designed to support hiring and employee benefits. Examples include credits related to:

  • workforce training and apprenticeships
  • employer-provided childcare programs
  • hiring employees from targeted groups through the Work Opportunity Tax Credit

These incentives can help offset the cost of recruiting and training workers; providing family-friendly employee benefits, and strengthening employee retention. For many small businesses facing a tight labor market, these credits can meaningfully reduce the cost of building a strong team.

For small business owners, the One Big Beautiful Bill Act creates several opportunities to improve tax efficiency and long-term planning. In summary, key areas worth reviewing include:

  • business entity structure
  • innovation and R&D spending
  • financing strategy
  • workforce incentives
  • long-term exit planning

Because the impact varies widely depending on income, industry, and growth plans, coordinating with financial professionals can help ensure you are making the most of these new rules.

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Why the Financial Decisions You Make in Your 50s and Early 60s Matter More Than Any Other Time

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It is fair to say that in the minds of many in affluent households, retirement success is determined by market returns alone. This is not surprise given the fact that every day everywhere we are bombarded by news concerning the ups and downs of major stock market indexes. In reality, research after research shows that retirement success is determined by how taxes, RMDs, Social Security, and Medicare interact over time.

What’s more, the difference between proactive planning and “do nothing” defaults during your late 50s and early 60s routinely reaches $500,000–$1,500,000 in lifetime after-tax wealth for households with net worth ranging from $3 million to $8 million. There are numbers behind that statement.

Most pre-retirees’ households with net worth of $3 million to $8 million share a similar balance sheet like this:

Asset Type     Typical Allocation
Tax-deferred (401(k)/IRA)             45%–65%
Taxable brokerage             25%–40%
Roth             5%–15%
Home / Other    Excluded from income planning

This concentration in tax-deferred accounts is the root of most retirement tax problems. Let’s look at a hypothetical pre-retiree couple age 60 years old with a $3 million portfolio and $1.8 million in pre-tax accounts. Assume a 5% annual growth rate of their pre-tax portfolio, by the time they reach age of 73 when they start their first RMD (required minimum distribution) from their pre-tax retirement plan(s), their first RMD would be close to $98,000. Combined with Social Security, it is estimated that 85% of Social Security Benefits would be taxable, and they would pay higher Medicare premium. And their overall marginal tax rate would be pushed up to as high as 32%.

The conclusion: RMD planning is not optional.

One of the important financial decisions pre-retirees in their late 50s and early 60s must make is when to claim their Social Security benefits. For example, the claim timing for a married couple with net worth of $5 million and $3 million tax-deferred portfolio can mean a big difference in the range of approximately $450,000 to $600,000 in retirement income.

The conclusion: for affluent retirees, the timing of claiming Social Security benefits is often a tax and longevity hedge, not an income necessity.

As people gets older, healthcare expense gradually becomes their largest expense especially during their retirement. No planning or bad planning can significantly increase a retiree’s Medicare premium paid. For example, a married couple age 66 years old with a net worth of $8 million find out that Medicare premiums increase dramatically because their Modified AGI exceeds IRMAA thresholds due to a one-time Roth conversion at age 64. Depending on the amount of the conversion, their Medicare Part B + D surcharges could add up to $10,000 per year. Due to income stacking that persists for multiple years, their lifetime excess premium could top $120,000.

Conclusion: Medicare is not a healthcare decision—it’s a lifetime pricing contract.

Across households with net worth in the range of $3 million to $8 million, proactive planning during ages 55–65 typically delivers:

  • $250k–$600k in reduced lifetime taxes
  • $50k–$150k in avoided Medicare premiums
  • $300k–$800k in increased after-tax legacy value
  • Greater income stability in market downturns

Bottom line for high-net-worth pre-retirees: your mid-to-late 50s and early 60s are not just about investment performance – they are more about engineering outcomes. This is the final window where you can:

  •  Reshape future RMDs
  • Control tax brackets
  • Optimize Social Security
  • Lock in Medicare costs
  • Improve estate efficiency

Once RMDs and Medicare begin, most decisions become reactive.

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Why You Need to Review Beneficiary Designations Periodically

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When it comes to financial planning, most people focus on saving, investing, and reducing debt. But one often-overlooked detail can have a major impact on your generational wealth: beneficiary designations. Whether it’s a retirement account, life insurance policy, or bank account, these designations dictate who receives your assets when you pass away—sometimes regardless of what your will says.

And that’s exactly why you need to review them periodically.

Wills Don’t Override Beneficiary Forms

Many people assume their will controls everything, but that’s not the case. Beneficiary designations on accounts like IRAs, 401(k)s, and life insurance policies are legally binding. If they don’t align with your will, the designation on file takes precedence. That can lead to unexpected—and sometimes painful—surprises for surviving loved ones.

Avoid Probate and Legal Conflicts

Assets with named beneficiaries typically bypass probate, meaning they transfer directly to the designated individual. That’s a good thing—but only if the designations are accurate. Outdated or incorrect forms can create confusion, legal disputes, and delays that add stress during an already difficult time.

Life Changes, and So Should Your Beneficiaries

Marriage, divorce, births, deaths, changes in your relationships, and even changes in your children’s relationships can all affect who you want to inherit your assets. For example, if you named a spouse as your beneficiary and later divorced, forgetting to update that designation could mean they still receive your funds—despite your current wishes. Similarly, if you welcomed a new child or grandchild, they might be unintentionally left out.

That’s why we recommend reviewing your beneficiary designations at least once every two to three years, or whenever there’s a major life event. Check all relevant accounts—retirement plans, life insurance policies, bank and brokerage accounts—and confirm not only that the right people are listed, but also that their contact information is current.

Your beneficiary designations are a small step that offers significant peace of mind— by reviewing them regularly you could save your loved ones from many headaches and lots of legal fees down the road.

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Every Parent Needs an Estate Plan

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The recent tragic death of Liam Payne, a member of the music band “One Direction”, once again highlighted why every parent needs an estate plan. Liam died last year at the age of 31, leaving behind a young son and an estate of roughly $32 million without a will. So, Liam’s assets would most likely be divided by a court based on applicable laws. The court will also appoint guardian(s) for his minor son.  These arrangements may or may not be what Liam Payne wants. We never know.

In the United States, over half of adults don’t have a will.  Many people think estate planning is for the wealthy or the elderly. This couldn’t be further from the truth. In fact, estate planning is a fundamental act of responsibility and love — especially for parents. At the heart of any estate plan is the well-being of your children. Think about it: if something were to happen to you tomorrow, who would raise your kids? That sounds terrible, but without a legal will or guardianship designation, the court decides — not you. The process can be lengthy and may result in a guardian you wouldn’t have chosen. Naming a trusted guardian ensures your children are raised by someone who shares your values and parenting style.

An estate plan allows you to designate how your assets — such as savings, home equity, and life insurance — will be managed and distributed. Without a plan, your estate may go through probate, a time-consuming and potentially expensive legal process. Worse, your children could receive their inheritance in a lump sum at 18, without the maturity to manage it wisely.

Grief and stress can bring out the worst in people. An estate plan reduces ambiguity and prevents confusion or disagreements about your wishes. Clearly defined plans about guardianship, inheritance, and personal possessions can protect family relationships during an already difficult time.

Knowing that your children will be cared for emotionally, physically, and financially — no matter what — is a powerful source of peace. An estate plan gives you that peace. One of the reasons people don’t get around to estate planning is that the task seems too overwhelming and they don’t know where to start. That’s why we developed estate plan review and implementation checklists and break them into chunks for our clients to get their plan in order. We can also act as our clients’ resource and help them find the right people they need for additional expertise and assistance on completing their estate plan.

Parenthood is about planning ahead — whether it’s for your child’s first steps or their college education. Estate planning is one more crucial way to ensure you’re prepared. It’s not just about wealth distribution; it’s about protecting what matters most: your children, your values, and your peace of mind.

Every parent, regardless of income or assets, needs an estate plan. Don’t wait for a crisis to force your hand. Start the conversation now — because your family deserves a secure future.

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What Role Does Your Financial Advisor Play in Estate Planning – Revisit

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In 2019 I wrote an article with the title “What role does your financial advisor play in estate planning process?” Now I would like to revisit this topic given that Coronavirus pandemic has brought estate planning front and center to the minds of many people old and young.

In the past, when the words “estate planning” came up, most people would conjure up an image of an old, super wealthy man, pondering plans about who will get his enormous amount of fortune after he is gone. There are a couple of inaccuracies with this image. First of all, estate planning is not only about dealing with one’s monetary assets. Second, estate planning is critical and beneficial not just for older people.

So, what is estate planning? It involves using wills, trusts, insurance policies, and other legal documents to give instructions on what happens to your personal property, your tax, care of your young children and/or pets, and if any, your health care arrangements and final arrangements upon your death, etc.

Then, what role does a financial advisor play in her client’s estate planning process?

  • A financial advisor can help clients create plans that truly reflect their values, goals, and wishes with consideration of their overall financial situations.

Experienced financial advisors know that having estate planning documents do not always mean that a person’s estate planning goals are accomplished. Does the plan achieve what one wants to leave behind? A financial advisor knows a client and his/her family well and will take consideration of client’s overall situation in clarifying and prioritizing client’s goals and objectives before wills and trusts are drafted.

  • A financial advisor helps ensure continued success of client’s estate plan.

Estate planning is a dynamic process. Estate planning does not end after a client sign the estate planning documents. A financial advisor helps clients identify proper assets to fund their estate plan, designate and update beneficiary, review their situations annually and work closely with attorneys to update any changes in client’s family situations in the estate planning documents.

  • A financial advisor can reduce client’s mistakes and save them costs by increasing the chance that client’s estate plan will be carried out successfully.

An estate plan is not successful if client’s estate plan is not carried out as intended. Working with attorneys, a financial advisor can help ensure client’s assets are transferred properly by avoiding mistakes and minimizing administrative costs at death. Also, in some cases an advisor can help client’s intended beneficiaries locate and account for the assets they previously might not know of.

It is probably true that nobody wants to talk about his or her own death. But, let’s be honest, by avoiding and delaying this important planning, one simply does disservice to their loved ones. The pandemic taught us some valuable lessons. So, stop delay and start planning.   

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How to Help Your College Students Have Positive College Experiences

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I call the period that runs from every September to next May college application season for high school seniors across the country. The 2020/21 college application season is almost over. Now it is time for most high school seniors to weigh the offers and envision the lives they will be living for the next four years.

This is a time of excitement as well as anxieties for both students and their families. As parents of soon-to-be college freshmen, they all want their children to have four successful college years. But, I know that “success” is a highly subjective word. And student’s college experiences may be different due to the kind of colleges or universities they attend.

So, first let us define what success in college means. Success in college, according to many college students themselves, means achieving good grades, graduating on time, maintaining a balanced social life and landing a good job after graduation. On the surface, these goals seem to be simple and easy to achieve, right? In reality, however, there is no small number of students either struggle academically or have a hard time fitting in socially.

After perusing books and articles related to this subject and talking to some parents whose kids have already gone through colleges, I found out some universal traits of college students who have had positive experiences during college.

The first trait of such a student is having definite goals for life. I cannot stress enough of the importance for a college student to have definite goals for his or her life. But, there is a caveat. The goals should be what the students truly want for themselves, not the goals their parents or society set for them. Lucky are those who have concrete goals even before they set foot on college campuses. These students are motivated, self-driven and confident. They will seek and even create the kind of college experiences that help them achieve these goals.  

The second trait of a successful college student is having a good amount of self-control. The majority of high school seniors will leave their childhood homes and live in some kind of campus housing arrangements for the first time. No longer in their lives will there be nagging about eating healthy food and finishing their homework on time. At the same time, they are constantly facing the tasks of making choices: going to parties or working on that course assignment which is due very soon, eating healthy meals or eating whatever they want, and etc. Life is about trade offs. College life is no exception. The students who have successful college lives are those who are able to make good decisions most of the time. Generally speaking, making good decisions need good amounts of self-control.    

The third trait of a successful college student is the possession of good study skills. Academics are a big part of college life. It is hard to believe that a college student is having a positive experience when he or she struggles academically. For students who lack confidence in this skill set, I would like to share with them the formula for academic success outlined in Purdue University’s Guide to Creating a Successful College Experience:

  • Read the syllabus
  • Go to every class
  • Sit near the front in class
  • Find a study partner or group in every class
  • Take good notes.
  • At the beginning of each semester, ask yourself:
    • Do I understand what is expected of me in each class?
    • Do I have contact information for someone in every class to study with or contact in case I’m sick?
  • Manage your time wisely
  • Never let a week go by where you don’t understand the content in your courses
  • If you are confused or lost in a class, visit your professor, go to a help lab or study with a friend. Use your campus resources — they are there to help you
  • Study 2 hours for every hour you are in class

The fourth trait of a successful college student is getting involved in a wide range of activities. We know that college success is more than just good grades. Activities outside classrooms not only enrich students’ lives, they also help students explore their interests, develop social skills and possibly gain life-long friendships. Some of the activities include volunteering, working part-time on campus, getting involved in student’s residence hall, doing internships or studying abroad.

In addition to the above four traits, another factor affecting students’ college experiences is the emotional support or lack of it from their families. College years are coincident with a person’s transition period to adulthood. And this transition period is filled with stresses and struggles. In Janet Hibbs and Anthony Rostain’s apt named book – “The Stressed Years of Their Lives”, they talked about the mental problems facing today’s college students. Alarmingly, almost one-third of all college students report having felt so depressed that they had trouble functioning in the last twelve months according to the authors. Although so called “helicopter parents” are mocked and discouraged, this does not mean that parents can stay out of their college-age children’s lives other than writing tuition checks.

Before parents send off their children to college, they need to be aware of two important laws that could be critical to their children’s well beings. They are HIPAA and FERPA. HIPAA stands for Health Insurance Portability and Accountability Act. HIPAA protects a person’s confidential health information. FERPA stands for the Federal Educational Rights and Privacy Act of 1974. FERPA was designed to protect the privacy of educational records and to give students the right to inspect and review their educational records (collegiateparent.com).

In most states 18 is the legal age of majority, which means most college students’ health information and academic records are protected under law and not shared with their parents without the students’ consent. By checking the students’ academic records parents could detect early signs of their children’s mental issues. In order to access their students’ transcripts parents need a consent form to disclosure of FERPA protected academic records. In the age of Covid-19, it is also important for parents to have signed HIPAA waiver and health care proxy from their college-age children in order to make medical decisions on their children’s behalf. If parents need more information on these forms they can contact their financial advisors and/or family attorneys for help.

Looking back, 2020/21 college application process is quite a journey for both high school seniors and their families amid a global pandemic. As the high school seniors are about to open a new chapter of their lives, I wish them all successes in college.

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Your 2021 Essential Financial To-do List

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2020 is finally behind us. What is your plan for year 2021? Here I outlined some financial tips for you to put on your early 2021 to-do list to jump start the year to be a successful and prosperous one for you and your loved ones. Below are some of the essential personal financial information you will want to save and keep in handy as your reference guide throughout the year.

  • Adjust your retirement plan contributions for 2021

2021 retirement plan contribution limits

Plan Maximum
Deferral 		Age 50
and Over
Catch-up
Contribution
401(k)/403(b) $19,500 $6,500  

Deductible IRA 		$6,000 $1,000
Non-Deductible IRA $6,000 $1,000  
Roth IRA $6,000 $1,000

The individual IRA contribution deadline for 2020 is April 15, 2021.

Phase out range for deductible IRA is $105,000-$125,000 for joint filing if covered by a workplace retirement plan; Phase out range for Roth IRA is modified AGI from $198,000-208,000 for joint filers.

Health Savings Account Contribution Limit for 2021:

  Self-only Family Coverage
Contribution Limit $3600 $7200
Contribution Limit over age 55 $4600 $8200
High-deductible health plan
minimum deductible   		$1400 $2800
High-deductible health plan
out-of-pocket maximum   		$7000 $14,000
  • Keep in mind these important income tax facts for 2021:

2021 Income Tax Brackets and Rates:

Tax
Bracket 		Single Filer
Income Range 		Married File Jointly
Income Range
10% $9,950 or less $19,900 or less
12% $9,951- $40,525 $19,901 – $81,050
22% $40,526 and $86,375 $81,051 and $172,750
24% $86,376 and $164,925 $172,751 and $329,850
32% $164,926 and $209,425 $329,851 and $418,850
35% $209,426 and $523,600 $418,851 and $628,300
37% $523,601 or more $628,301 or more

The standard deduction is $12,550 for individuals and $25,100 for married couples filing jointly.

2021 Alternative Minimum Tax (AMT) Exemption Amounts:

  Single or
Head of
Household 		Married File Jointly
or
Qualified Widow 		Married File
Separately
Maximum
Exemption 		$ 73,600 $ 114,600 $ 57,300
25% reduction
if over: 		523,600 1,047,200 523,600          
Exemption
Eliminated 		818,000 1,505,600 752,800

2021 Qualified Dividend and Long-term Capital Gain Tax Rate:

Income Range:
Single filer 		Income Range:
Married file jointly 		Capital Gain Tax Rate
$0-$40,400 $0-$80,800 0%
$40,401-$445,850 $80,801-$501,600 15%
Over $445,850 Over $501,600 20%

Net Investment Income Tax:

Individuals will owe the tax if they have Net Investment Income and also have modified adjusted gross income over the following thresholds:

Filing Status Threshold Amount
Married filing jointly $250,000
Married filing separately $125,000
Head of household (with qualifying person) $200,000
Qualifying widow(er) with dependent child $250,000
Single $200,000

The Net Investment Income Tax (NIIT) applies at a rate of 3.8% to certain net investment income of individuals, estates and trusts that have income above the statutory threshold amounts.

  • Annual Exclusion for Estates and Gifts

In 2021, the first $15,000 of gifts to any person is excluded from tax.

Since 2018, the Tax Cuts and Jobs Act temporarily increased the basic exclusion amount for estate and gift taxes for tax years 2018 through 2025, with both dollar amounts adjusted for inflation. For 2021 the exclusion amount is $11,700,000 per individual, and $23,400,000 for a couple.

  • Review your Insurance policies

If your situation has changed during 2020, such as change of job, birth of a new child, or purchases of new car, house, etc., you need to review your insurance coverage or talk to your financial adviser to help you come up with proper coverage amount for your current insurance needs.

Don’t forget the deadline for individual tax filing is Thursday April 15, 2021.

Gather and organize all your paperwork such as W-2 forms, bank statements, mortgage payment statements, property tax receipt, business expenses, investment statements from your broker-dealers, charity donation receipts, etc. for your 2020 tax filing.

  • A couple of events that you might want to keep an eye on:
    • House Ways and Means Committee Chairman Richard Neal plans to reintroduce in the new Congress the Securing a Strong Retirement Act of 2020, which would boost the required minimum distribution age from 72 to 75. In 2019, the Secure Act passed by congress has pushed the age that retirement plan participants need to take the required minimum distributions (RMD) from 701/2 to 72. If this new bill passes, it would create more favorable financial planning opportunities to people contributing to various retirement plans.
    • Another thing to watch for is for families with kids applying for college in the fall 2021. The dates and places of taking the SAT/ACT had been changed a couple of times last year by the institutions which offer these tests due to the pandemic. Since the pandemic is still going on parents need to make sure their high school kids know the exact dates and places of taking these tests. Parents and students can go to www.collegeboard.org to check out the latest updates on SAT test or www.act.org for ACT tests.
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Estate Planning for Gen X and Millennial in the Age of Coronavirus Pandemic

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For many in the generation X and millennial age groups they tend to have some misconceptions and procrastinate when it comes to estate planning.

The first misconception about estate planning gen X and millennial hold is that estate planning is for older folks. The second misconception is that estate planning is only about monetary assets; therefore, people with few financial assets need not to bother with it.

In fact, there is nothing further more from the truth than these misunderstandings. Estate planning is critical and beneficial for people old and young, and even more so in light of the current pandemic crisis we are in. Since the breakout of coronavirus pandemic some gen X and older millennial started to have sense of urgency and concerns about the lack of estate planning. They are concerned about what will happen to them and their family if they become seriously ill or worse.

So, what is estate planning? It involves using wills, trusts, insurance policies, and other legal documents to give instructions on what happens to your personal property, your tax, care of your young children and/or pets, your health care arrangements and final arrangements upon your death, etc.

As more and more states reopen after “lock down” people gradually venture out and ease back to “normal” life. Still, many people are cautious and avoid “non-essential” human interactions as much as possible.

Traditionally, in order for a will to be valid in Texas, a typewritten will must be signed by the person who makes the will and two witnesses must be in presence. In these difficult times, this requirement poses great challenges for many including gen X and millennial who have never had these estate planning documents in place and need to set them up right now. So, what can a gen X or millennial in need of an enforceable will do while observing social distancing?

Though in July of 2019 the Uniform Law Commission has approved the Uniform Electronic Wills Act, also known as the E-Wills Act, which allows probate courts to recognize electronic estate documents as being fully valid and enforceable, no state has enacted this law yet, unfortunately.

On April 8, 2020, Governor Abbott issued an order temporarily allowing regular notaries to notarize the following documents by video conference: durable powers of attorney, medical powers of attorney, directives to physicians, and self-proving affidavits for Wills.

The above order, however, does not eliminate the requirements for witnesses to be physically present. This suspension is in effect until terminated by the Office of the Governor or until the March 13, 2020 disaster declaration is lifted or expires.  Documents executed while this suspension is in effect, and in accordance with its terms, shall remain valid after the termination of this suspension.

Further more, according to the announcements published on the website of the Texas Secretary of State, the following conditions shall apply whenever this suspension is invoked:

  • A notary public shall verify the identity of a person signing a document at the time the signature is taken by using two-way video and audio conference technology.
  • A notary public may verify identity by personal knowledge of the signing person, or by analysis based on the signing person’s remote presentation of a government-issued identification credential, including a passport or driver’s license that contains the signature and a photograph of the person.
  • The signing person shall transmit by fax or electronic means a legible copy of the signed document to the notary public, who may notarize the transmitted copy and then transmit the notarized copy back to the signing person by fax or electronic means, at which point the notarization is valid.

Alternatively, a holograph will can be used in place of typewritten one in emergency situations. A holographic will is a handwritten will which is made by a person, or in legal term a testator, entirely in the testator’s own handwriting and signed and dated by the testator.  

Another valuable tool in a person’s estate planning repertoire is letter of intent. Letter of intent is not a legal document per se, but it is an invaluable piece of your estate planning documents. It usually complements a person’s will. As the name implies you can use this document to tell your loved ones what your assets are, where to locate them and how to access them, etc. You can specify your non financial wishes in this document as well.

Comparing with older people, gen X and millennial have relatively simpler estate planning needs, and the above planning techniques can be some of the options gen X and millennial utilize during these unprecedented times. After the society fully returns to its pre-pandemic way of life, gen X and millennial can revise and expand these documents with the aid of an advisor and/or lawyer.