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January Quarterly Newsletter - 2024

Updated: Jan 29

The Looming Revert

The tax provisions in the Tax Cuts & Jobs Act of 2017 are due to revert back, after December

31, 2025, to what they had been in 2017—less than 24 months from now. But if and when

that threshold is crossed, it could be a rude awakening for a number of taxpayers.


For example? One of the most dramatic shifts would be the estate tax rates. The federal

estate tax exemption in 2017 was $5.49 million; that is, the first $5.49 million that a taxpayer

passed on to heirs would pass estate-tax free. Today, that exemption is a whopping

$13.61 million; for married couples, the combined exemption is $27.22 million. The “revert”

would bring exemption down to something like $6.5 million—a third as high as currently.


The Tax Cuts & Jobs Act also doubled the standard deduction, which led to fewer people

going through the hassle of itemizing deductions. The standard deductions for the 2017 tax

year were $6,350 for single filers; $12,700 for people married filing jointly. Today, the standard

deduction is $14,600 for single filers; $29,200 for those filing jointly.


The tax table revert would generally put people in higher brackets. Most Americans would pay

1-4 percent more in personal taxes under the old reverted-to tax tables than they are currently.


Yes, we still have time to prepare for this. But anyone whose net worth is above the old

estate tax threshold should start making plans now for how to get money out of the estate,

and everybody should brace themselves for once again having to go through the chore of

itemizing deductions—unless Congress comes up with a new tax bill. At that point, anything

is possible.


Congratulations!

Tyler Alvord, CFA

Tyler Alvord has been promoted to Principal at LVM. Tyler holds a

BBA in Finance and an MBA from Western Michigan University. He

joined LVM in 2012 and specializes in equity research and client

wealth management.



Andrew (Drew) Lantinga

Drew Lantinga, who joined LVM Capital Management as an intern in

2023, has been hired as a full-time Associate Advisor and Assistant

Securities Trader. Drew graduated from Western Michigan University

with a BBA in Finance and is working on completing his Certified

Financial Planner™ certification.


Be wise in inheritances: As a beneficiary, ask the right financial questions

Inheriting money often comes with a mix of emotions—ranging from anxiety and grief to anticipation and gratitude. And sometimes, the suddenness of such an event can make it a challenge to think clearly. As a beneficiary, how should you navigate these waters?


Asking a few key questions can help ensure that you make the right choices in line with your values and life situation.


For inheritance of any size

Is this going to change my lifestyle?

If you inherit money, it’s tempting to make quick, significant life changes. It could be a new car or a bigger house. It could even be retirement. But before diving in, reflect on the permanence of these decisions. Is this inheritance sizable enough to support a lifelong lifestyle change? Also,

working isn’t just about income. It provides purpose, structure, and social interactions. If you’re considering early retirement, weigh the nonfinancial aspects of work as well.


Am I looking at this to make me happy?

While sudden wealth can certainly bring comfort and luxuries, it’s important to understand that real happiness is seldom tied to material gains. Relationships, experiences, and personal growth are the foundations of a fulfilled life. Money is simply a tool. Consider this inheritance as a way

to support and enhance these aspects rather than replace them.


How can I honor the individual I inherited from?

An inheritance is not just a financial asset—it’s a legacy. Remember the person who left it to you. Would they have wanted you to use it for a specific purpose? Were there causes they were passionate about? By aligning some of your choices with their values, you not only honor their

memory but also create a bridge between generations.


• In 20 years, will I look back and be glad about what I did?

Time often provides clarity. Try to visualize the distant future. Will your imminent choices resonate positively two decades from now? Long-term thinking helps in prioritizing what genuinely matters.


For larger inheritances

Often, large inheritances come with myriad tax considerations, including:


Estate taxes: Depending on the size of the estate and where the decedent lived, the estate may face federal or state estate taxes. These taxes are based on the estate’s net value and can significantly reduce the overall inheritance.


Income taxes on inherited IRAs: If you inherit an Individual Retirement Account (IRA), you might have to take Required Minimum Distributions (RMDs), which can be taxable. The tax treatment varies based on the type of IRA (traditional vs. Roth) and your relationship to the deceased.


Capital gains tax: If you sell inherited property or stocks, there might be capital gains tax implications based on the difference between the inherited value and the selling price. A misstep or oversight can lead to sizeable tax liabilities. It’s important to align with a tax professional who

can guide you through these intricacies. They can help ensure you remain compliant while optimizing your inheritance.


The excitement and the sense of responsibility that comes from inheriting significant wealth can feel like a wave carrying you toward immediate action. Major financial decisions, however, especially those impacting your longterm financial trajectory, merit deliberate thought.

Remember that while the inheritance might be sudden, the decisions you make around it don’t have to be. By taking a step back, you allow yourself the space to process, understand the full spectrum of options available, and consult with experts. This measured approach can be the difference between building a legacy and suffering financial missteps.


While it can be tempting to trust your instincts, there are many complexities surrounding large inheritances. That’s why leaning on an experienced team can be invaluable.


Attorney: Legalities around wills, trusts, and estates can be intricate. An attorney can help ensure all legal procedures are followed, rights are exercised, and potential pitfalls are avoided.


Accountant: With the multitude of potential tax implications, a seasoned accountant can help navigate the tax code and minimize your tax burden.


Financial advisor: Beyond immediate implications, there’s the broader picture of wealth management. How should you invest? What’s your risk tolerance? How can this inheritance align with your long-term financial goals? A financial advisor can analyze this information and provide

strategies tailored to your unique situation.


Working with a team of experts isn’t just about managing the inheritance—it’s also about ensuring the continued health of the legacy you’ve inherited.


Explore your options

Inheritances present a wide range of opportunities, some of which include:

Giving it away: There’s a unique joy in philanthropy. Supporting causes or charities can create ripple effects in communities.

Giving to others: Whether it’s setting up a college fund for a child or helping a friend in need, giving it away can be a way to spread the wealth.

Using it for education: Knowledge is its own form of wealth. Consider courses or degrees that can enrich your life or that of a family member.

Paying off mortgage or debt: Financial freedom is liberating. Using the inheritance to eliminate debts can help you breathe easier.

Planning a family vacation: Travel not only provides a way to recharge your batteries, it’s also a way to create lasting memories.

Hunter Yarbrough, CPA, CFP, is a vice president and financial advisor with CapWealth



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