Beyond the TCJA

In the months leading up to the recent election, much of the conversation with clients revolved around the potential sunset of the TCJA. With the election results signaling a higher probability of the TCJA’s extension, these discussions are now shifting in focus. The real question isn’t if your high-net-worth clients are having these conversations—it’s who they’re having them with.

For married clients with estates under $30 million, the urgency surrounding immediate estate tax planning appears to be subsiding. However, the potential extension of the TCJA doesn’t eliminate the risks that threaten business, personal, and family wealth—it merely reduces the urgency. Our mission as advisors should be to bring clarity to sophisticated and complex challenges, focusing on opportunities that exist to eliminate or mitigate these risks.

Key Opportunities for Advisors:

1. Income Tax Planning and Retirement Accounts

With Secure Act 2.0 delaying Required Minimum Distributions (RMDs) and eliminating the stretch provision for inherited IRAs, clients with substantial IRAs and qualified plans must confront significant income tax exposure. These assets, often subject to ordinary income tax rates, effectively allow the IRS to claim nearly 40% in taxes. Strategic planning to manage and protect these assets efficiently is more important than ever.

2. Reviewing Grantor Trust Structures

Many advisors have already implemented estate planning strategies using SLATs or other grantor trusts. Now is the time to revisit these plans. Opportunities exist to defer, reduce, or even eliminate grantor income tax liabilities and create synthetic basis advantages that enhance long-term wealth transfer strategies.

3. Life Insurance Strategy Evaluations

With the potential extension of the TCJA, evaluating the structure and performance of existing life insurance policies is crucial. This includes premium finance, private finance, and split-dollar arrangements. A comprehensive review should consider:

• The appropriateness of gifting and funding strategies.
• The current performance of contracts and structures relative to new legislative contexts.
• Options for tax-efficient exits or modifications if the policies are no longer needed due to legislative changes.

4. Business Owners and Transferable Value

For business owners, protecting and enhancing transferable value is more critical than ever. This requires strategies that safeguard intangible assets—such as special knowledge, skills, and relationships—and tangible assets. Insulating these from risks like family dynamics, creditors, and unforeseen disruptions ensures that business valuations remain strong, while preserving personal and family wealth.

Uncovering and Addressing Wealth Risks

Even with the potential extension of the TCJA, threats to wealth remain—whether they are unknown or unfunded liabilities. The role of an advisor is to help clients identify these risks and insulate their wealth against them. This includes protecting against family dynamics, creditor claims, potential litigation, tax obligations, and market volatility. Now is an ideal time to reinforce existing strategies and seize opportunities to enhance wealth protection.

Final Thoughts

As we move into 2024, the landscape of wealth planning continues to shift. The potential extension of the TCJA offers a reprieve from immediate estate tax pressures, but it does not negate the complexities that high-net-worth clients face. By focusing on strategic income tax planning, reviewing existing trust structures, evaluating life insurance policies, and safeguarding business value, we can guide our clients through this evolving environment with clarity and confidence.

If you’re interested in learning more or accessing the Private Wealth Advisor Guide to navigate these challenges, I invite you to connect and explore how these strategies can protect and grow your clients’ wealth effectively.