Beyond investment discussions, client conversations usually fall into one of three categories: headlines, deadlines, and gossip. Successful advisors are prepared to discuss recent developments of interest to their investors.

In this quarterly article series, we’ll highlight recent headlines, timely deadlines, and relevant gossip to help you stay abreast of what’s new and trending in the wealth management/wealth transfer space.

Headlines

Market volatility: Transfer at a discount and saving a GRAT

If the first three months of Trump’s second term is an indicator of the future, then we could be in for nearly four years of a turbulent equity market. But if the market gives you lemons, there just may be some ways to make lemonade from a wealth transfer perspective.

Two wealth transfer strategies commonly used in a down market are discounted lifetime gifts and grantor retained annuity trust repair/redemption.

Lifetime gifts can be an effective way to reduce estate taxes at death. Limited partnerships and LLCs are often used in the gifting context to create discounted values and maximize lifetime gifts while minimizing gift taxes. Discounts of 10%, 20% or more can often be achieved. However, the tax savings gained using these techniques is partially offset by lawyers’ fees, appraisal fees, and administrative costs.

However, when the equity market is 10% off its most recent high, that “discount” is created organically. No lawyers’ fees. No appraisals. No administrative costs. Gifts made during these natural troughs allow more to be gifted and can help push future growth into the hands of those receiving the gifts.

A grantor retained annuity trust, or GRAT, is a legally sanctioned way to make a gift of the future growth of an asset. GRATs are irrevocable trusts created by experienced estate planning counsel and are most effective when funded with an asset that grows (appreciates) in value. The giver of the gift gets to retain the original value of the gift, and the gift recipient gets the appreciation. Win-win!

If the value of the GRAT asset declines, however, then there is no growth to be given. And if the drop in value occurs early in the term of the GRAT, there may be little chance that the gift-giver’s goals will be achieved.

The good news is, these GRATs may be salvaged by exchanging the original assets with other assets of equal value, such as a bond portfolio. Although the “bond GRAT” will also most certainly fail, a new GRAT can be created and the original assets contributed with a much greater chance of success for growth from a market trough.

Progress toward new tax laws: The sun still sets

For investors and advisors trying to create and modify financial and estate plans, Congress’ efforts to pass new tax legislation continue to progress at a snail’s pace. In March, both houses of Congress passed a continuing resolution to fund the U.S government until September 30, 2025, effectively funding the federal government at fiscal year 2024 levels.

Now, we wait for Congress to act (or refuse to act) on the Tax Cuts and Jobs Act (TCJA) of 2017, which is scheduled to “sunset”, or revert to the law prior to TCJA, on January 1 of 2026. The House of Representatives and the Senate have separately passed legislation that would extend or make “permanent” – that is, not subject to a sunset – the TCJA, with some changes reflecting campaign promises. The reconciliation process is now being used to unify these two proposals into a single piece of legislation (“one big, beautiful bill”). Potential changes being considered include raising the state and local taxes (SALT) deduction cap, lowering the corporate income tax rate, and excluding tips from taxable income. Stay tuned!

Deadlines

1. Corporate Transparency Act: A deadline no more (at least for U.S. companies): On March 26, the Financial Crimes Enforcement Network (FinCEN) issued an alert stating that all entities created in the United States – including those previously known as “domestic reporting companies” – and their beneficial owners are now exempt from the requirement to report beneficial ownership information. Existing foreign companies that must report their beneficial ownership information have at least an additional 30 days (or until April 25) to do so.

2. Estimated tax payments: For individuals required to make quarterly estimated income tax payments, the first is due April 15 for income earned January1, 2024 through March 31 and June 15 for income earned April 1 through May 31, 2024. If the due date for making an estimated tax payment falls on a Saturday, Sunday, or legal holiday, the payment will be on time if you make it on the next day that’s not a Saturday, Sunday, or legal holiday. (Note that June 15 falls on a Sunday this year)
3. Sunset of the TCJA: This is still scheduled for January 1, 2026. Individual income tax brackets and rates will change, and gift and estate tax exemptions will decline. See our comments above for more background and the prospects for passage of new legislation.

Gossip

Passings

January: Marianne Faithfull, Bob Uecker, David Lynch
February: Gene Hackman, Michelle Trachtenberg, Roberta Flack
March:  Richard Chamberlain, George Foreman
April: Val Kilmer, Jay North

Interesting cases and rulings

Timing is EVERYTHING in this case interpreting Michigan’s “Slayer Statute.”

The intent of a “slayer statute” is to prevent one who “feloniously and intentionally” kills a decedent from inheriting from that decedent’s estate. But what if murderous plans are made and then the intended victims die of natural causes? That’s what happened in the case of the Donald F. Clark Trust.

Donald Clark established a trust for his own benefit and that of his wife, Elaine. Following Mr. Clark’s death, Elaine was the sole beneficiary. Following her death, their son, Donnie, was named the beneficiary, but Donnie predeceased Elaine. That left Mooney (unrelated and a former trustee) as sole surviving residuary beneficiary. Mooney was charged with solicitation of murder of Elaine (the trustor’s wife) and Donnie (the trustor’s son) based on allegations and testimony of an individual identified only as “Blackhawk.” However, Donnie, and then Elaine, died of natural causes before the murders could take place. The solicitation of murder charges were dropped when Blackhawk died, also of natural causes.

Following Elaine’s death, the current trustee asked the probate court to bar Mooney from receiving trust assets based upon Michigan’s “slayer statute.”  The trial court said the statute did not apply and the appellate court agreed. Thus, when the beneficiary doesn’t cause the decedent’s death and isn’t convicted of having killed the decedent, the slayer statute won’t apply.

Advisor/Client takeaway: Clarity, communication, and compliance with the law are essential elements of estate planning. Help your clients crystallize their true goals and obtain experienced estate planning counsel to document their wishes.

If you have questions on this or other wealth planning topics, feel free to reach out our Wealth Strategist Group or your Janus Henderson representative.

The information contained herein is for educational purposes only and should not be construed as financial, legal or tax advice. Circumstances may change over time so it may be appropriate to evaluate strategy with the assistance of a financial professional. Federal and state laws and regulations are complex and subject to change. Laws of a particular state or laws that may be applicable to a particular situation may have an impact on the applicability, accuracy, or completeness of the information provided. Janus Henderson does not have information related to and does not review or verify particular financial or tax situations, and is not liable for use of, or any position taken in reliance on, such information.