Welcome to the blog, "It happens!" and estate tax update.

Welcome to the blog, "It happens!" and estate tax update.

October 27, 2021
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Friends,

Welcome to my blog.  The purpose is to write about timely financial topics and ideas, personal experiences and any "positive" regional economic news that comes across my desk.  There will be no timeline so the posts will be random.  Lastly, if you would like to be put on our mailing list for when we update the blog, please reach out to Kim (731-285-0097).  I hope you enjoy the information.  If you have any questions about these musings, drop me a line to chad@daviswealthservices.com.

"It Happens"

It's Friday afternoon after work.  I am heading out of town to see a long awaited concert.  In a split second, my thoughts go to, "Is this really happening?".  It was as if I could see in slow motion and all I could wonder is, "How bad is this going to be?"  As I am driving around fifty miles per hour, a vehicle pulls out in front of me and I hit him without even hitting the breaks.  The airbags deploy and the smell of smoke fills the car.  I didn't move.  I didn't know if I should.  For a minute, I didn't know what had happened, if I was hurt, if anyone else was hurt and who the president of the United States was (literally asked in a concussion test later).  Within minutes, police and paramedics were on the scene.  It has been decades since I was in any kind of accident but this was the worst of my life.  Thank God no one was injured.  But I felt there was some value to you in sharing this experience with you.  Specifically I will cover: 1. It can happen to anyone at any time. 2. What do you do if it happens? 3. How can you prepare from a liability stand point.

1. According to the Tennessee Department of Safety and Homeland Security, as of 10/27/21, there have been 5,154 crashes that resulted in fatality or serious injury in the state of Tennessee.  That is a year over year increase of 9.4%. This does not include a crash like mine where there were no injuries but the vehicle was totaled.  Most automobile crashes are a result of an impaired driver or a distracted driver.  Regardless, it is becoming more and more important to drive defensively, put your phone on blue tooth and wear your seat belt.  And for those of you in west Tennessee, Shelby county leads the state with 844 of the states fatalities and serious injuries.  The next largest county is Davidson with 527.

2. a.) If you are in an accident, unless there is a reason to leave, stay in your vehicle until a paramedic and/or police arrive.  Getting out your vehicle in heavy traffic could be fatal. b.) Do not move your vehicle.  Moving the vehicle may put you in a blame game when it comes to the police report and insurance claim.  If the vehicles are where they ended up when the accident occurred, the police can accurately map it out in the report.  c.) Immediately call 911.  You want the police and paramedics there sooner than later. d.) In my case, no one was injured in the accident so we were summoned to the side where the police took statements and the paramedics checked us out both physically and mentally.  My wrist was injured so they did tests that I passed.  With that, I declined to go to the hospital.  However, if you suspect you may have more serious injuries or the paramedics insist on you going, by all means go.  e.) I also suggest you have a folder on your phone titled, "important documents".  In this folder, have a copy of your insurance card and your license.  The police are going to want this information and this will save your a lot of grief.  f.) And lastly, this is hard to plan for but be aware of it, have a contact that can pick you up.  In my case, I was out of town and was going to be left on the side of the road during rush hour with no available ubers or cabs.  I was lucky to be able to rely on a friend to pick me up and get me home.

3.  My insurance agent is Jason Ladd of White & Associates in Dyersburg.  Jason and I have been friends for over twenty years.  The first bit of advice that I will give you concerning insurance is, "Know your agent and know them well."  If you are "using" insurance, you are already in a stressful situation.  Remember me telling you to have a folder on your phone... well I didn't (I do now).  I called Jason and his team and they were able to send me a picture of my insurance card on the spot for the police.  From beginning to end, Jason and his team would update me on the status of my claim and made sure I was satisfied with the outcome.  I can not say enough good things about the service I received in a stressful situation.

Once a year, Jason calls me to do a review of all of my insurance.  As a professional, I understand the value of another professional's advice.  There are a lot of corners that you can cut in auto insurance.  My advice, "don't"!  There is no way that I can cover every single issue and caveat about car insurance in this blurb so my advice is to see your insurance agent at least once a year to do a comprehensive review.  However, in particular, I want to focus on one rider that really paid off for me. 

"Un-insured Driver"  and "Under Insured Driver" are riders (add-ons) to your insurance contract.  I reside in Tennessee and the state does not require these riders.  However, to not have them, you must sign a document.  In my case, the guy that pulled out in front of me had no insurance.  So even though it was his fault and he had no insurance, my insurance paid for my car, taxes, deductible and rental car.  If I did not have this rider, I would have been responsible for going after this driver in court and I do not believe the outcome would have been as easy and satisfactory.  The odds are you have these riders, but I encourage you to ask your insurance agent if you do and while you are at it, ask about your umbrella liability policy.

Estate Tax Update

To help raise revenue to pay for President Biden’s Build Back Better Plan, Congress is considering a number of tax law changes, including adjusting estate taxes.

One of the proposals would reduce the estate tax exemption to anywhere between $3.5 and $5 million, with an effective date of January 1, 2022. Another proposal would bring new rules to grantor trusts, including a change to how life insurance held in a trust would be taxed.1,2  At this point, many ideas are being evaluated, but nothing is final. Corporate tax rates, individual tax rates, and capital gains taxes are also on the negotiating table.  For now, the federal estate tax exemption remains at $11.7 for 2021, with a married couple having a combined exemption for 2021 of $23.4 million.3

But it wouldn’t be a surprise if the estate tax law changed as part of the overall plan. In 2019, 2,570 taxable estate-tax returns were filed, and they owed a combined $13.2 billion. Lowering the estate tax exemption to $5 million would raise an estimated $52.3 billion over five years.1

As difficult as it may be, the best approach is to wait-and-see. It would be hasty to make any estate changes based on current discussions.

But if you’re feeling unsettled as Congress continues to work on these changes, please reach out. Estate strategies often need adjustments as tax laws change, and it’s best to be prepared for a range of potential new rules coming out of Washington.

Lastly, Kim and I hope you and yours are well.  As COVID seems to be declining and we begin to return to normal, please stay safe.  As we wind down to the end of the year, if you would like a year end review of your investments and financial plan or a second opinion, please give us a call.  Until next time, Cheers!

Regards,

1. CNBC.com, September 29, 2021
2. FA-mag.com, September 22, 2021
3. IRS.gov, October 25, 2021

This article is for informational purposes only and is not a replacement for real-life advice, so make sure to consult your tax, legal, and financial professionals before modifying your estate tax strategy.

Using a trust involves a complex set of tax rules and regulations. Before moving forward with a trust, consider working with a professional who is familiar with the rules and regulations.

Several factors will affect the cost and availability of life insurance, including age, health, and the type and amount of insurance purchased. Life insurance policies have expenses, including mortality and other charges. If a policy is surrendered prematurely, the policyholder also may pay surrender charges and have income tax implications. You should consider determining whether you are insurable before implementing a strategy involving life insurance. Any guarantees associated with a policy are dependent on the ability of the issuing insurance company to continue making claim payments.

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite, LLC, is not affiliated with the named representative, broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information and should not be considered a solicitation for the purchase or sale of any security.