Tax And Estate Law Changes July 2021

Watch Now:

For more details and resources on this topic, see below.

Tax and Estate Law Changes July 2021

Downloadable Resources

INTRODUCTION

Hello and welcome, I’m David Witter, founder and CEO of Financial Harvest Wealth Advisors. Welcome to the recording of the webinar that we did on July 21st on Tax and Estate Law Changes: How To Prepare Now To Be Successful With Expected Changes. We had special guests, we had Carol Felsing CPA with Felsing LLC and also Andrew Thompson with ZKS. Some of the things that we talked about during the recording – as you’ll see here in a moment – we went into the four key areas that we’re focusing on: the possible changes capital gains increases, ordinary income tax increases, maybe a loss and a step up in cost basis, and then we moved into the estate tax. Then we talked about some of the top considerations when you’re planning and anticipating some of these changes and we had some Q&A throughout and then we talked about what’s next for you the listener. So, we join the conversation talking about capital gains tax increases – Andrew Thompson, Esq.: We had a scenario where it’s effective down the road, where you would have an installment sale, and then you would kind of leave that flexibility open to perhaps accelerate reporting. Carol Felsing, CPA: Right? And at this point we don’t have any legislation. We don’t have any, it’s not even in the Green Book is installment sales. If it’s retroactive, will they tax that back at this year’s rate or when it gets collected down the road. But if they do make it effective 1/1/22 and not in ’21, I would, you might be talking to the people that you have an installment sale with actually discounting a little bit. So you can get that cash in now and be taxed at the lower rates versus, I mean, that’s a 20% spread essentially. David A. Witter, CFP: So in other words, accelerate, capturing the realized gain this year at the lower rate. Carol Felsing, CPA: That’s right. So they would sell off, they would recognize the gains. And even if it’s a good position to hold, go ahead and sell it off now, I, you know, your investment, we can talk about what your thoughts are on that. Do we, do we go ahead and sell off now and then wait the 60 days and get back into it if it’s a good position, but at least get those gains off the table and re-establish our basis. David A. Witter, CFP: Yep. Yeah. Fair enough. Yeah. And I think what you’re speaking to is trying to avoid the wash sale rule. That’s for losses, for gains, you can actually just re-repurchase the exact same position. So it makes it straightforward. But yeah, we have that on the agenda. We call it gain harvesting. We did gain loss or a loss harvesting last year in March and April this time. But now might be flipping the script on that, so, right. Very good. One of the things I was going to toss out there is opportunity zones. I know they were very popular and got a lot of press a year or two ago. It’s kind of mellowed out a bit, but it if the somebody captures a gain and then it’s retroactive where it’s going to be pushed to a higher rate, they’d actually might have time still to defer some of those gains into opportunity zones. So another, another plan and strategy to keep keep in mind as well. Carol Felsing, CPA: The only other thing I want to throw out when we’re talking about capital gains is if they’re selling a business, one of the things that’s not – hasn’t been talked about, and we may talk about it a little bit further in depth. Know that any what’s in the Green Book right now, we haven’t talked about it. You’re not seeing a lot of press on it is those that income that comes from a flow through operating business. They’re talking about having that hit at the investment tax rate as well. So, which we don’t have right now, and that will totally change the picture of what we do for planning at the end of the year for our businesses. David A. Witter, CFP: Yeah. So, so an example that might be if Carol has her small business and, you know, she has a certain amount of income above expenses. She pays maybe some salary, but then she might have profits in the business at the end of the year current tax, all, she definitely pays ordinary rates on it, but that income from the business isn’t subject to the 3.8% surtax. But yeah, great point. It’s kind of a hidden in the proposed laws to start enforcing that 3.8% on all business income as well. And now that would dramatically change, especially for business owners, some of their planning they’re doing. Yeah. Carol Felsing, CPA: Right. And for some reason that’s just not getting a lot of press. I’m not really sure why maybe they don’t think this has a chance of passing, but it’s there. And I think people need to know about it because that will change the year-end bonus structure David A. Witter, CFP: Without a doubt. Yeah. Well, let’s move to the ordinary income rates here quickly. Again, these are some of the proposed changes on the left is current tax bill, right? As some of the possible changes. So, you can see notice on this, this taxable income level, it’s kind of nestled in here between the current 35% and 37% rate. And the proposal is to jump that up to 39.6%, same thing on the single it’s kind of nestled in there between the 35% and the 37%, and then popping that up to the 39.6% pretty easy, pretty easy calculation, current tax law you know, top rates, 37%. But if it’s passed now, some of those wages in business income are going to push to the higher bracket, which would be the 39.6%, and that’s another 2.6% or so. So about $18, $18K in this example of additional taxes. David A. Witter, CFP: But if this is passed, in addition to the capital gains increase, you can see that the capital gains, but then be tossed in there. And that increase shows up as well. So it’d be coming getting hit from two different angles in terms of the tax increase in both of these are indeed passed. And then I had a note down here at the bottom of what it was, what Carol just exactly spoke to was, hey, if this approach change shows up of you, then the, that 3.8% would also be subject. It would be an input us on business profits or a flow-through. So focus through some ideas on if, if this let’s say is a a January one enforcement what can clients be doing now to be well-prepared for maybe higher ordinary rates in the future? Carol Felsing, CPA: Right. I think what, knowing what goes through your return, I think is going to be key to people planning for this and helping their advisors plan for this. I do think we’re going to see some change in investments that come about because of this, especially if we take gains off the table at the end of the year and these ordinary income rates do go into effect for next year. I think they’re going to consider maybe some more tax exempt right now. Tax exempt is pretty much fallen out of favor for quite a while. I think that may come back into favor. We’ve talked about doing some, maybe charitable remainder trusts where that income is not flowing through all-in-one year. But I do think there are gonna be some changes in what they run through their return. I do see if that business income gets taxed at 3.8%, regardless of whether they receive the money out or not. I do see people taking a bigger wage amount on it, paying the, paying the Medicare part of it, 2.9% and saving 1%. I mean, it’s not a whole lot, but if you’ve got someone that’s taken out a million dollars in distributions, you know, 1% on a million does make sense to do the planning on it. Yeah. David A. Witter, CFP: So what I’m listening there is for a business owner, when they’re deciding how much to push out in terms of salary wages versus distribution of profits, if there’s new changes here, it might make sense to push more out in wages as opposed to the distribution of profits. Correct? Yeah. And I think across the board too I just like to call it either. You’re going to try and realize income in 2021. If you’re thinking 2022 is going to be higher or the flip, if you’re worried about, hey, I think I’m, you know, higher rate to, you know, this year, you might try and defer some of the income in the 2022 and then clients of ours listening here today. I think also Roth conversions. I do have the broken record. I always bring this up. We did a, quite a number of those last year in March and April when the equity values are much lower. But if it looks like in 2022, the ordinary rates are going to be higher. That’s another reason for considering doing Roth conversions. Carol Felsing, CPA: And they may, if they’re having a business owner, they may decide if the income rates are going to go up higher next year to defer some of those big expenses, go ahead and bite the bullet this year at the lower rate and defer that new pavement of your parking lot or the, you know, the new big piece of capital equipment that you need for your medical practice and defer that until January. So you get the expense in the next year. David A. Witter, CFP: Yeah, very good. I see a question here. It says is the 23% tax a done deal or is it a proposed tax? If it is proposed, which it is, what are the chances the tax will or will not pass Andrew or Carol want to take that one? Carol Felsing, CPA: I think they’re going to do something with the ordinary and capital gain rate because that’s low hanging fruit. It’s easy to do, and it will generate a lot of revenue. I think personally, from what I’ve read and been a part of on conversations, we think this will be the first thing that changes now, whether it goes up all the way to the 43%, I don’t know. But I do think it will be increased. Andrew Thompson, Esq.: And I would second that I think it’s also in addition to kind of being a low hanging fruit, it’s a lot of what kind of President spoke about on his campaign trail, what he was trying to accomplish during his administration. So I think it’s certainly the, of the items on the agenda. I think these are probably the most likely changes something. Maybe not all the way up to this, this high, of a rate. But something along these lines. David A. Witter, CFP: Yeah. And one thing is fascinating to me is the numbers of this. So if they were, if they did change both of those tax laws, increased cap gains rates and increase the ordinary rates, the estimate is they would generate somewhere around $36 billion of additional revenue. That’s like 1% of the deficit that they just just printed. So it’s not like it’s really going to make a big dent. We’ll see that it’s a good political narrative sometimes. Right. Carol Felsing, CPA: One more reason that they’ve got to do something I don’t think they’re going to just minimally raise the taxes because you know, he’s got to raise revenue. We, we, aren’t sending such a deficit and he’s trying to raise 4.3 trillion. So yeah, yeah. David A. Witter, CFP: Fair enough. Well, let’s move next to the step up in cost basis. And I think Andrea, I’ll just have you talk them through this. What is the kind of like the current law and then what’s the possible change when it comes to the step up in cost basis? Andrew Thompson, Esq.: Great. So yeah, this is, this is a big deal. And it can potentially change a lot of how people think about holding their investments. And so currently what we’re, what we have is a scenario where on death, there’s, what’s called a step-up in basis on assets where you would take the fair market value as of date of death on an asset. And you would step up for basis purposes to that fair market value as of date of death. So that when that asset is later sold by an heir they’re offsetting any gain by that you step up in basis. And so back in you know, if you have long term held investments, that can be huge. So if you have some, some assets that you invested, $200-$300,000 in a couple of decades ago, and now that property is worth $1.5, $2 million. Andrew Thompson, Esq.: Now all of a sudden, if you were to pass away while holding that asset, then your basis would step up to that fair market value as of date of death. And then your heir could turn around and sell that asset in a relatively short time span and pay little to no income tax because of that step up in basis. We now have a different scenario being floated where there’s going to potentially be, you know, that death would be treated as a realization event. And so now all of a sudden unrealized gains can be brought into the picture here subject to some exclusions. So there’s, I think David had on, on his chart there kind of where that is a million dollar exclusion and then for married couple that’s doubled, and then there’s some other kind of exclusions as well for certain types of property or certain family businesses and things like that. Andrew Thompson, Esq.: So we have to wait and see a little bit more about kind of how they really would interpret some of this. And even if it gets passed in the first place, I think you’ll, you’ll probably get a sense as we go through this. David hit it on the intro, you know, a lot of times on webinars or seminars like this, there’ll be a very specific topic or change in the law that we’re addressing and we’ll be able to say, here’s how you want to think about it. And kind of the challenge for David and Carol and myself right now is like we’re a little bit unsure to in certain respects what’s even being proposed. And then from what’s being proposed, how that’s going to be interpreted or if it will even be passed. And so I think the idea right now is to try to just alert you to these possible changes so that we can be thinking through what, what considerations you may want to have if this ultimately starts looking like it’s going to become a reality. And so that’s the big overall kind of picture of what we’re looking at as potential change in the step up in basis. Carol Felsing, CPA: And this one, this will be effective from the CPA perspective. A lot of times if we had clients that had owned, you know, AT&T stock or the predecessor to that for 50 years, and they had no idea what their basis was, or if there were property that the family had held for 75 years. And we had absolutely no idea what the basis was. That was the last asset we would sell in their estate because it was going to be problematic to ever get that basis. So we said, you know what, we’re not going to mess with trying to find the basis we’re going to leave that stock or that investment until they die. And then we just automatically get a step up in basis. And we’re good to go if this passes, as it stands, we will no longer have that option. And means families that have been holding stock and property and businesses for years, somebody has got to figure it out that basis. And that’s going to be problematic, David A. Witter, CFP: Completely agree at out of these four. This one is the one that actually scares me the most. But you know, speaking to what you just said, that Carol there sometimes we’ll have a new client that transfers existing assets that they own in a taxable account. And if the cost basis is missing and we’re not able to figure it out, we don’t touch it. You just let it sit. And then we’ll do one of two things. They can hold it until they pass, right. You get that step up late or gift it. And and that, that kind of leads to what are some of the possible things that clients can do to help mitigate some of the concern with the loss of a step-up in basis. So let’s start there. I mean, it, w w what would you tell clients if this became law for like moving forward in 2022, what are the things they need to be doing or thinking about now to help help themselves and help their family? Carol Felsing, CPA: Well, if we, if, if they have property or stock that they don’t know the basis on, they need to consider what that’s going to look like. And is there any way possible to get it now? And how much time and effort and work is that gonna cost and weigh that against what the cost is. If we don’t know the basis, you know, you zero basis, what, what do you do? But that’s to be a problem with not a lot of easy answers to them. Andrew Thompson, Esq.: Yeah. This gets back to some of what I was saying a minute ago about kind of some of the unknowns still with some of these proposals. And cause I’ve seen some where there’s potentially difference in treatment, whether assets are gifted versus inherited. So potentially still seeing a step up in basis on death, but only seeing a step up in basis on a gift, if you aren’t using part of that $1 million exemption or exclusion or whatever, you’re calling it. So you could have a really strange scenario where people are making gifts and then some of that property has a step up and some of it doesn’t, which could either further confuse things. So it’s, it’s really strange. I think if you see it come to be then part of what you might want to consider from a planning standpoint is you know, along the lines of some of what you even talk about now still where potentially you’d be taking highly appreciated assets and try and move those towards the charity or to to a spouse where there’s you know you know, they have that exemption currently with assets passing to a spouse or to charities what’s being talked about. Andrew Thompson, Esq.: And then kind of lower appreciation assets may be going to a lower generation kind of thinking about how you’re structuring your state plan. So it, it’s a significant potential change that if it comes to be, you’re going to want to evaluate how you’ve structured your plan. David A. Witter, CFP: Yeah. And I really think charitable trusts will become a very key planning tool, even more so than it is right now. And because you know, some people, if they’re in their seventies or eighties, or like all those differ right. And get the step up in basis when I pass, but if they’re like, okay, there is no step up basis. This is highly appreciated stock. I don’t want to pay all the gains at one point, you know, at one point in time by selling that stock, if they place into a charitable trust, they can start to get some income spread. Some of that taxes out of their time, get a charitable deduction, they get income from it. And then then at, at their passing, then it goes to charity, but we’ve done some of those for clients and it’s really turned out very well in their situation. So I think you’ll see even more interest in those charitable trusts. If we lose that step up in basis, Carol Felsing, CPA: I would agree with that. I think they’re going to be more more of active planning tool like we had before when the rates were high. The problem is we still got a problem with determining basis. You know, at least we still have to know basis. So I think people need to start looking at a lot of times, they’re not even aware. They don’t know the basis. They don’t, they don’t look at it. They don’t see it on the statement that there is no basis recorded. So that might be a planning point. I’d go through your investment statement. No, do we have basis on all these stocks? Are these positions, if not start looking for it now, because even if you want be the charitable trust or you want to give, we still have to know basis. Andrew Thompson, Esq.: Right. And I agree completely that this is a good technique to consider part of what we’re also having to watch to see if comes a change or not is proposing you know, realization event on transfers into, or out of trust because they are, even if you have that type of a split interest trust for the charitable trust, then a portion of it is going to be the deem sale in that, in that first year. So… David A. Witter, CFP: Yeah, hopefully that won’t pass. All right. Let me go quickly down to the the estate tax. So Andrew, just take a quick moment to talk through some of the possible proposed changes and the current law when it comes to the estate tax. Andrew Thompson, Esq.: Yeah. And so this has been interesting because I think a lot of what you heard coming out of the election was this kind of proposed reduction in the estate tax exemption from where we’re at right now, where we have this year, $11.7 million of exemption per person so you double that for a married couple, with a 40% tax rate. And what was really kind of a big part of the discussion, was it reduction in that exemption? Either cutting that in half or possibly going all the way down to a $3.5 million per person exemption again, you would double that for a married couple and potentially raising the rate also. And so that seems to have kind of fallen off as far as, I guess, you’re trying to say what the priority seems to be based on these proposals that are coming out. Andrew Thompson, Esq.: That’s, that’s not as much as what you’ve seen through the plan but there are other proposals out there and because it’s some of what you know, you and Carol have raised as potential issues here with what, what you could see if they try to implement some of this loss and step up in basis. For example, it may end up being that, that kind of this reduction in the state tax exemption becomes more of the conversation again, because they start saying, well, we’re, we’re, we’ll, we’ll leave the step up in basis, but now let’s turn our attention back to the estate tax, perhaps. It’s, it’s hard to say because there’s already a reduction of the exemption built into the existing law, whereas January 1, January of 2026 the exemptions that we currently have, we’re going to be cut in half. Andrew Thompson, Esq.: And so politically it would be a much easier for them to just say, we’ll just let that happen as it’s currently written, and then we’re not going to be blamed for that. And we’ll still get that reduction relatively soon. So part of what you’d be wanting to pay attention to if that’s entering the conversation as a real possible change. And if so, when and then is there something that you can do about it in terms of making use of exemption that’s available to you right now that may not be January next year or, or some other year soon. David A. Witter, CFP: Yeah. And I want to make sure that our listeners caught what you said, which was even if Congress does nothing for the next several years, the existing exemption was very high, you know, historically speaking, close to $12 million, it’s going to drop back down to $6 million come 2026. And and you know, some people are like, oh, well, I don’t, I don’t have millions of millions of dollars, but, you know, Carol, you said earlier like, well, what about your appreciation in your home at a mint, you know, here in Florida? That could be, you know, well, it is, it’s added into the taxable estate value, right? So keep an eye on that. And then if they did drop it down to that three and a half million exemption what are some things that people can be doing or preparing to do here at the end of the year, if that new at is going to be effective for next year? Andrew Thompson, Esq.: Sure. So I agree completely with what you just said is it’s kind of surprising sometimes how quickly you can when you sit down and look at it, get to a taxable estate depending on how you own life insurance, for example, right. If you have a large life insurance policy that that will get included as well in terms of the calculation and so you you’d want to really think through and make sure you have a good handle on where, where you’re at in terms of your estate. And then if you think that you’re in a spot where you would want to make use of the exemption that’s available then a lot of what we’ve been talking with clients about and implementing have been making transfers and gifts to certain types of trusts, irrevocable trusts to move assets out of the estate. Andrew Thompson, Esq.: And that would, that would then, you know, preserve the availability of that exemption right now. You make use of that exemption before it goes away. And, and the trick is you have the amount of exemption that’s available to you right now to use in order to really use the extra, you’re going to have to transfer that above and beyond what you think is going to be reduced to in the future, whether that’s $3.5 Million or $6 million or $5 million or something like that. Because whatever you use, if you only say transfer a million, then down the road, they’re going to say, well, you just already used a million of what exemption is available to you still now down the road. And so really what we try to make sure that we’re doing is good tax planning. Yes. But also making sure that we, we leave our clients in a scenario where from an investment standpoint, from a liquidity standpoint, from a being able to fund their, their lifestyle no, we’re not putting them in a position where now all of a sudden all these assets have been transferred into trusts for benefit of the spouse or a family member or something like that kind of made their lives a little bit more difficult than we needed to. Andrew Thompson, Esq.: So it’s, it’s a to David’s point when it’s done correctly, it’s, it’s part of the pretty large and extensive analysis both from this tax perspective, what we’ll be thinking through from an investment standpoint, what options do we have? And so what we’d like to avoid is a scenario where we’re, we’re starting those conversations right in November, December, because that’s, that’s how you can overlook something. And, and I know we’ve discussed also that a lot of these assets, when you’re making these types of transfers you have to have appraised. And a lot of the appraisal firms right now are already saying, they’re, they’re backed up. So really the key is to start having these conversations now, so that if it looks like you’re going to need to pull the trigger you already have a good sense of what you want to do. Carol Felsing, CPA: We’ve got several clients right now that were making use of the both IDGTs – intentionally defective grantor trusts – as well as irrevocable trust and going ahead and using up those exemption amounts, just because they’re afraid it is going to go away. We know it’s going to go away in ’26 anyhow. So why not go ahead and use them now? And that way, the appreciation even between here and now we’ve gotten out of their estate. One of the things in that his whole estate proposal that came through in the Green Book was that they are going to do away with minority discounts. So often we would put money in either into a investment partnership and do some discounting from minority interest. Or when we, when the parents who have owned a business for years, decide they want to go in and start passing that down to the kids. Carol Felsing, CPA: Since it’s minority shares, they’re giving them we’re gonna, they, they get some minority discounting there. Now the IRS has clamped down on some of that minority discounts, but it is a discount. And part of that Green Book proposal is those discounts would go away. He’s also going to make the transfer into an intentionally defective grantor trust, a triggering event for income tax, if he gets his way. So those are all that goes. I mean, who knows, but we’re going to go ahead and do it now for those clients that won’t change their lifestyle. If we go ahead and gift this money away and use up their unified credit amount. But to Andrew’s point we’ve got some now that are scheduled out to be valued and they can’t even get to them now until October. So if that’s anything, you know, they’re considering doing yet, they need to get, probably get with your advisor now and at least get on the books to get some valuations done, because they’re backing up because it is a path that a lot of people are starting to take. David A. Witter, CFP: So act now, not later. Carol Felsing, CPA: Well, yeah. And the word on the street is there’s no, as we kind of talked about on Monday, there’s no motivation for them to come to grips with any of this prior to the end of the year. And it’s going to be a mad dash, just like it was last year that they’re trying to push all this into law in December. And if you wait to find out exactly what’s going to happen. And when, when the, we anticipate when the law of whatever it be become enacted, it will be too late. They won’t be able to maneuver, and we won’t be able to do the gifting like that because you can’t get the valuations done. David A. Witter, CFP: Let me check in Kellen any questions that have come in on the chat or the Q and A? Kellen H. Williams: Yes. So we have three. All right. I’ll start with the ones in the chat. So let’s say the Biden tax goes into effect on January 1st, 2022. There was talks while there could be a big sell off. Do we have any suggestions to hedge the potential market response? David A. Witter, CFP: I don’t think Carol and Andrew want to take this one? Yeah. Yeah. Good question. Well, it let’s say, let’s say that you’re going to employ that strategy. Like, let’s say we recommend your client. Let’s harvest these gains, you know, now in this tax year, because we know what the tax rate is, we would just immediately turn right back around and reinvest. So from a tax perspective, you can capture the gain and then rebuy the exact same position so that your portfolio is still intact and you still get the returns. So would there be volatility? Absolutely. would it be a catastrophic, you know doom and gloom event? I don’t see. I don’t see how that activated. Kellen H. Williams: That’s great. Thank you. The next one, I keep hearing Green Book referenced. What is that? Is it the IRS tax book? Carol Felsing, CPA: No, the Green Book – Biden first came out with his law back 4/28, which was that day. And then he came out with further clarification about a month later, what they call the Green Book almost to the date a month later. And that had more items of tax that he wanted to address and how he wanted it addressed. So it’s, that’s what they call the Green Book. Cool. Kellen H. Williams: Thank you. Last one. I know they had mentioned possibly changing the QBID or qualified business income deduction as part of the tax law change. Any additional news on this? David A. Witter, CFP: I haven’t seen it. So maybe it’s safe to say, but remember it does go away in 2026 respected old tax law. Yeah. Okay, great. We’ll keep the questions come. Let me pop over to a map that Carol found in we had great conversation with this, so I’ll tell our audience here, Carol, what they’re looking at and you know, what it means to them. Carol Felsing, CPA: This is, this is something that tax foundation who is supposed to be non-for-profit and, you know, bi-partisan that, you know, that take one stand or the other, but where the taxes are going to be born, like by congressional district. And if you look to see the big cities you got the San Francisco, the LA, the Chicago, the New York City there they’re residents, and you got Fort Worth and Dallas in there. Well, a little bit of Miami they’re shown to going to be bearing the brunt of this tax impact with a lot of other states, as you’ll see, you know, the Alabamas the Georgias, the Oklahomas, and they’re going to get more refund money coming back. So they’re going to get a tax cut. I do find it interesting to see where that’s going to, where that’s going to hit. They guess on average people in those higher brackets are gonna bear $8- to $10-thousand per taxpayer across the board. So to make it revenue neutral for them, but it’s, it’s going to be significant, but you look at those red areas, that’s where they anticipate most of the tax to be born. Yeah. David A. Witter, CFP: And one, one word of caution. So if you’re looking there in Florida, it looks like, you know, maybe Orange and Seminole, it doesn’t look like there’s going to be much effect, but if you’re on this call now and you know, clients have one of ours many of you are in that top threshold where many of these tax laws would affect you. But the color on the map is more in general population. So stayed, stay on top of this and be aware cause it could be a pretty significant impact. Carol Felsing, CPA: Did you remember in Orange county and Osceola county, which you’re seeing the blue on our end, we’ve got a lot, a lot of service workers that are working out at the theme parks making, you know, close to minimum wage. So they’re going to benefit by all that, which is what’s driving us to be below. Okay. David A. Witter, CFP: Makes sense. All right. Well let’s just last couple of minutes here. So Carol, Andrew kind of finished off what are some of the things that our our clients or listeners need to be thinking about right now? What are some of the top planning opportunities? What are maybe some, if they’re like, “Hey, I need three steps. What are the three steps I need to be doing now to be well-prepared?” Carol Felsing, CPA: From my perspective, I want my clients to know what’s going in their return. Take a look at it. See what’s generating the revenue. A lot of times, if it’s just a W2 or some 1099s, that’s pretty easy to maintain. But a lot of our clients, they have sources of income coming from a variety of directions. And remember this coming year, last year, we weren’t having take RMDs. And this year they’re going to go back to that. So that income is going to look significantly different perhaps than it did last year. So know where those areas of income are coming through. Focusing on a lot of that unearned income would be number two. Do we need to get out of those mutual funds that we have no control over where capital gains are coming from? I mean, that to me is a worth some time being spent on that. Carol Felsing, CPA: And look again at some, maybe some tax exempts, which I think those may come back into favor and you wait until tax exempts, you know, everyone’s going after them that that may drive the price. So but talk with your advisor investment advisor, talk to David and see what his thoughts are on that. And I do think let’s look again at some charitable remainder trusts. I think those you know, a lot of people of late have been using donor advised funds, perhaps we get away from the donor advised funds and move more to the charitable remainder trust to spread that gain out of our period of time. David A. Witter, CFP: Great point and Andrew before I come to you. So Carol, you mentioned about the mutual funds sometimes can have a surprise, like distribution, a quick story. In fact, it’s a client is on right now. I won’t use names, but at the end of last year we had done some tax loss harvesting for her and it dramatically dropped her tax bill, but she also had a broker, I won’t say the name of the brokerage firm who heavily turned the account and generated tremendous gains. So there’s, there’s a difference of how the investment professionals behave. And you can see that a lot of times that doesn’t show up to the client until at the end of the year. And they’re like, well, where did this come from? So point well taken. Carol Felsing, CPA: They, they don’t know. They, they, in fact, if you look at your monthly statements, cause we do a lot of back office for a lot of trust. They’re not even disclosed as capital gains on the statements until after the end of the year. So they don’t even know. David A. Witter, CFP: Yeah. Fair enough. Andrew any parting thoughts here for planning? Andrew Thompson, Esq.: Yeah, no, I think I would just kind of reiterate what has been said along the way. Right. Then I think it would be to step back and look at the discussion as a whole and to Carol’s point you know, I think, I think it’s reasonable to expect some change. We don’t know exactly what that’s going to be, but that there’s very likely going to be some change. And so to sit down and speak with David and Carol and myself, and to really think through, okay, here’s what we’re, we’ve got for your individual needs in situation start having those conversations. See if there’s anything, if you have an existing plan in place right now, and you think that needs to be tweaked or thought through and maybe a different way, considering some of these proposed changes, if you don’t have a plan in place you know, it’s always good to have one even just for non-tax reasons. Andrew Thompson, Esq.: Right. So to sit down and, and kind of think through that, but you know what if it’s, whether it’s a charitable trust, whether I think what we’ll potentially see here if let’s say the step up and basis issue comes to be I think in the same way that you have seen life insurance be used as a strategy for estate taxes in the past, you’ll probably see that come back in more of a discussion as well. Just to handle some of these other taxes that may come on. And so just to just stay on top of things as much as you can, David does a great job of keeping his clients learning. And Carol has a blog as well that she uses to keep folks up to date. And so I would just say, try to pay attention and try to start those conversations as soon as you can. David A. Witter, CFP: Perfect. Yeah. And I’ll, I’ll kind of come full circle here. Here are my top three things to be doing right now. Number one is get a good assessment of where you stand currently with the current tax law, like a projection for 2021. W what bracket would you be in with a capital gains rate would you face just getting a good understanding of where you’re sitting right now? Because that helps with making good plans for if things change or if they don’t change. Number two is just looking at where you stand with your cost spaces and unrealized gains and losses. Like we would like to say, so what, what is the appreciation in your stock portfolio? What is the appreciation in your home? What is the appreciation and maybe a commercial property that you own? So you kind of know where you’re sitting right now. David A. Witter, CFP: I was like, oh gosh, I got $3 million of unrealized gains. And then at least you then know, and how you can move with it. And then last but not least is on the estate side. So just kind of doing a quick tally of your net worth and what will be quote a taxable estate or amounts. And right now you may be free and clear, but it was fascinating to me is we start projecting out and say, okay, let’s say your assets grow a little bit over time and you look five, 10 years out. Maybe the exemption drops and suddenly you’re at a spot where like, yeah, I’m going to have a taxable estate in the near future. So those would be my top three, other than staying in tune with you, with you all. So any more questions Kellen, let me do one more check in anybody have any questions I’m want to come off of you know, the webinar’s status and move into the panelists and ask the question. Kellen H. Williams: We’re good to go. David A. Witter, CFP: Okay. All right. Well, Hey, look, if there’s any follow-up questions, that’s a good, good seg here. So let me talk about some follow-up opportunities. So for Andrew, he has a complimentary of roughly 30 minute conversation and he’s there for you. If you want to give him a call and say, Hey, here’s my situation. I have these questions. He’s happy to do so. And in the chat box Danica or Kellan are gonna pop this in. So it’s just a link that you can click on, but there’s his website, his email address. There’s the phone number. If you do call Sebrena, if you can get you scheduled with Andrew for a complimentary conversation with him with Carol, here’s her website, we’ll also drop that the chat box and her email address. And then if you call April can get you scheduled. David A. Witter, CFP: She has the same offer, you know, 30 minute complimentary conversation just to check in on your situation and make sure you’re well positioned. She also has a blog. Actually. Andrew mentioned that good job, give her a little props there. So that’s also in the chat, a chat box. If you just want to click on that and you can go to her blog and there is a place there to sign up for her newsletter and get notifications when she does blog posts and Carol hats off. And I’ve been really enjoying your blog posts. So thank you for doing that. And then last but not least there’s our website, Financial Harvest and my email address as well as our office number Danica, who is one of our panelists. She, she can get you scheduled and then another feature is going to drop in the chat box. David A. Witter, CFP: We have a link where you can actually go straight to my calendar and pick a 30-minute time slot for a video or a phone chat, it’s your preference. So she’ll give you those two links. And then secondly is she’s also going to put our blog in there. We do have a Coffee Talk coming up on August 31st. We’re going to kind of focus a little bit more on investments and inflation and possible tax law changes. What does that mean to investments and good Lord willing, we’re going to do it in person over here at The Coop. So obviously limited space, but she has the link there in the chat feature. If you’d like to go ahead and register for that. And we’d love to have you for our Coffee Talk on August 31st. All right. Any other final questions Kellen? From our participants? Kellen H. Williams: Nope. We’re good to go. Great job. David A. Witter, CFP: Yeah. Yeah. Thank you all so much. This has been great. And all of our attendees, thank you so much for being here and again, you know, pop us any emails if you have any additional questions. All right. Bye. Bye everybody.