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: A new President and Congress

It has now been determined that the Republican party will occupy the White House and hold a majority in both the Senate and House of Representatives. Many investors are wondering how this change could impact tax policy and legislation in the year ahead. Of particular interest is whether the Tax Cuts and Jobs Act (TCJA) – passed into law under the first Trump administration in 2017 – will sunset or become permanent.

What can financial advisors and the investors they serve do to prepare for potential tax law changes?  First, it’s important to remember that the TCJA runs through tax year 2025, so no changes would take effect until 2026. It also helps to understand how the balance of power among branches of government will ultimately determine the TCJA’s fate.

White House: During his re-election campaign, Trump expressed his intentions to extend the TJCA and introduce new cuts. But while the office of President is one of the highest-profile jobs in the world, it does not carry with it the ability or responsibility to make laws – only Congress can do that. While the President wields tremendous influence over legislative efforts, it is our senators and representatives who have the final say and make law.

In Trump’s case, his influence is further limited by the fact that he takes office as a “lame duck” president: The Constitution bars him from seeking another term, so he’s limited to what he can influence/accomplish in the next four years. Most of the members of the House and Senate are hoping for a longer tenure in office and will likely vote accordingly.

Senate: In the 2024 election, Republicans took four seats from the Democrats and hold a slim 53 to 47 majority. Appointment to the Presidential cabinet requires the “advice and consent” of the Senate, so one would think this process will be a bit less controversial with Republicans in charge. However, the nominees are typically questioned in public hearings by Senate committee members of both parties. Even if the appointment is inevitable, the political theatre could damage the cohesiveness of the Republican senators, although Trump has sought the ability to make “recess appointments” to avoid the spectacle of a public hearing on some of his nominees.

The party in the majority also appoints heads of committees and controls the agenda for consideration of various legislation. Clearly, there will be a focus on the campaign promises made by the newly elected President and congressmen and congresswomen. However, due to the slim majority and differences of opinion within the party, there is no guarantee of what, if anything, will pass into law.

House of Representatives: Again, the slim Republican majority (220-215, the slimmest margin since 1930) means there is little room for disagreement among Republican party members for successful passage of legislation. Majority leadership appoints heads of House committees and controls the legislative agenda. Although most legislation may originate in either the Senate or the House, the Constitution requires all tax legislation to originate in the House. That’s where we will first see some indication of the future of the TCJA.

So, what can investors do now? With the prospect of no TCJA sunset and no significant tax law changes in the near future, advisors are still using the TCJA as a focal point to encourage clients to act. Keeping the TCJA in the spotlight can help advisors refocus client attention away from taxes and back to foundational investment and estate planning goals – that is, what are they investing for and where they want their money to go. Tax efficiency is merely tangential to investing and wealth transfer planning.

Deadlines

Self-employed estimated quarterly tax payment
Self-employed workers are expected to make estimated quarterly tax payments. The fourth payment for the 2024 tax year is due January 15, 2025, and applies to income earned September 1 through December 31. However, those who file their 2024 Form 1040 by January 30, 2025, and pay the remaining tax owed do not need to make the January 15 payment.

CTA filing
The on again/off again Corporate Transparency Act of 2019 (CTA) filing requirement is off again – at least until a formal hearing can be held to determine the constitutionality of the mandate.

As a reminder, the CTA requires that certain U.S. and foreign business entities disclose information regarding their beneficial owners and persons who register or form them with the Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN). The deadline for companies created or registered before the effective date to file their BOIR (beneficial ownership information report) has been extended. Those companies created or registered on or after January 1, 2024, and before January 1, 2025, have 90 days to meet their reporting obligation.

Recovery Rebate Credit for 2021 tax returns
On December 20, the Internal Revenue Service announced plans to issue automatic payments later this month to eligible individuals who did not claim the Recovery Rebate Credit on their 2021 tax returns. Most eligible taxpayers have already received the credit; however, taxpayers who haven’t yet filed 2021 tax returns may be eligible for a refund as well if they file a return and claim the credit by April 15, 2025.

Following are some additional financial and tax dates to keep on the radar for the first few months of 2025:

March 17: Taxes are due for certain business types, including partnerships, multi-member LLCs, and S-Corporations. Depending on how your business is structured, tax forms may need to be filed by March 15, 2025.

March 31: This is the last day to make changes to your Medicare Advantage Plan. Also, if you have never signed up for Medicare and are 65 or older, March 31 is the last day of the General Enrollment Period. Note that your coverage starts the month after you sign up. You might pay a monthly late enrollment penalty if you don’t qualify for a Special Enrollment Period.

April 1: Required minimum distributions (RMD) are due if you turned 73 in 2024. Remember that RMDs are considered income. Be sure to discuss how taking RMDs will affect your tax situation with your CPA and/or financial advisor.

April 15 (Tax Day): Make sure you have e-filed or postmarked your federal and state income taxes by the end of the day. If you need to request a six-month extension, Form 4868 must be filed by this date. Even if you request an extension, you must pay any taxes due by April 15 to avoid interest and penalties.

Today also marks that last day to make IRA and HSA contributions for the 2024 tax year. Contribution limits for 2024 are:

IRA: $7,000 ($8,000 for those 50 or older)

HSA: $4,150 (individuals)/$8,300 (families). If you are 55 or older, you may contribute an extra $1,000.

Additionally, if you’re self-employed and make quarterly estimated tax payments, this is the due date for your first-quarter payment for the 2025 tax year.

Finally, if your business is structured as a C-Corporation and operates on calendar-year basis, taxes must be filed using Form 1120 by April 15.

Gossip: Selected celebrity passings, unusual cases and rulings

Passings:

October: Teri Garr, Ethel Kennedy, Mitzi Gaynor, Fernando Valenzuela

November: Quincy Jones, Chuck Woolery

December: James Earl (Jimmy) Carter, Jr.; Rickey Henderson (Major League Baseball “Man of Steal”); The Amazing Kreskin

Cases and rulings:

Clifford D. Steves Separate Property Trust

This case serves as a reminder that if state law provides forms or if court-approved forms are suggested, then use them!

Ronald Smith took on the role of successor trustee of the Steves Separate Property Trust. Smith failed to report or account to the trust beneficiaries for seven years and ignored a court order to produce an accounting. A new successor trustee was appointed and determined that Smith had inappropriately taken more than $4.5 million from the trust.

The newly appointed trustee served for five years and filed regular accountings on court-approved forms. There were no objections to these accountings until the fifth and final accounting was filed. At that time, Smith (yes, the same guy who stole from the trust) objected to entries on prior accountings but not to any on the final accounting. The trial court overruled Smith’s objections and the court of appeals agreed. The successor trustee used forms approved for use by the State and no objections were filed in a timely manner.

Advisor/Client takeaway: Pre-approved forms are the best way to ensure compliance with state law and avoid future liability. Many states provide forms for trusts, wills, and durable powers of attorney. The advice and guidance of experienced estate planning counsel is still essential to the proper selection and customization of these forms. Advisors should educate clients about using these forms if they are provided according to your state’s laws.

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.