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The $84 Trillion Wealth Shift: What Ohio National Mutual Employees Need to Know About Inheriting from Parents

The way that high-net-worth (HNW) and ultra-high-net-worth (UHNW) individuals distribute their wealth is changing dramatically. The way that wealth transfer is approached has changed significantly as a result of significant modifications to U.S. tax law, especially after President Donald Trump signed the Tax Cuts and Jobs Act in 2017. The federal estate tax exemption was significantly increased by this act, rising from about $2 million less than 20 years ago to $13.61 million now. As a result, an estate tax-free transfer of more than $27 million to heirs is now possible for married couples. The estate tax rises to 40% for assets that beyond this limit. For Ohio National Mutual employees nearing retirement, it is important to keep on eye on your investment portfolio during these dramatic shifts.

The estate planning methods of high net worth and ultrahigh net worth corporate individuals have changed as a result of this significant rise in the estate tax exemption. With an increasing trend towards delaying the age at which heirs can access their inheritance, trusts have become a regular tool in this context. This hold-up in access is not only a result of mistrust; rather, it is a calculated strategy to guarantee longevity and shield the riches from possible threats like creditors and divorce.

These factors are a component of a larger plan to handle the wealth transfer in a way that guarantees the assets' security and strategic usage. Wealth transfers are increasingly likely to come with conditions or demands that beneficiaries must fulfill in order to receive their inheritance. These requirements, which might include everything from academic success to involvement in certain charitable endeavors, make sure that the riches benefits the recipient as well as more general society objectives.

Given the context of the 'great wealth transfer,' where an estimated $84 trillion is anticipated to exchange hands over the next several decades, this strategic approach to wealth transfer is especially pertinent. The accumulation of wealth is changing during this time, with inheritance becoming more common than entrepreneurship. The geographic distribution of wealth further emphasizes the worldwide ramifications of these wealth transfer tactics, with half of the world's billionaires living in nations with no inheritance tax. Being mindful of tax laws on inheritance could be beneficial for Ohio National Mutual retirees.

These changing tactics are motivated by the desire of wealthy people to have control over how their fortune is used during their lifetime. This is typically expressed in letters of intent or other informal correspondence, laying out expectations for the successors' contributions and way of life without enforcing stringent guidelines.

Furthermore, wealth transfer methods go beyond simple inheritance. These include offering advantageous conditions for intrafamily loans and directly paying medical costs or tuition, thereby not deducting them from gift and estate taxes. This deliberate wealth distribution is further facilitated by the annual tax-free gift allowance, which will stand at $18,000 per recipient in 2024 (double for couples) and will not affect the donor's lifetime exemptions.

The 2017 tax law's sunset provisions make the present wealth tax exemption vulnerable to prospective revisions; if Congress does not extend it, the exemption could be cut in half by the end of 2025. Many high net worth individuals have accelerated their wealth transfer plans in anticipation of this impending shift in order to take advantage of the larger exemption while it is available.

The way wealth is transferred between high net worth and ultrahigh net worth individuals is changing and shows a sophisticated fusion of intergenerational wealth management, strategic philanthropy, and financial planning. In order to guarantee that wealth not only endures but also positively impacts the beneficiaries' and society's overall quality of life, it emphasizes the significance of strategic counsel and planning in navigating the intricacies of tax laws and wealth transfer schemes. Being aware of these tax laws and wealth transfer schemes may also benefit your plan of retiring from Ohio National Mutual.

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Within the framework of the 'great wealth transfer,' it is important to emphasize that charitable giving techniques are starting to take center stage for Ohio National Mutual individuals going through asset transfers. Donor-Advised Funds (DAFs) have become increasingly popular among wealthy people, according to a 2021 National Philanthropic Trust research, and contributions to DAFs have reached an all-time high. This trend highlights an increasing tendency for flexible, tax-efficient philanthropic entities that enable contributors to make assets contributions during their lifetime and maintain the flexibility to allocate distributions to charitable organizations over time. This strategy fits with the aspirations of many people who want to witness their riches have a real influence on the topics they care about in their lifetime.

The 'great wealth transfer' can be compared to sailing a magnificent ship across a large ocean. Rich people carefully plot the path of their wealth transfer, just like an experienced captain carefully prepares the route, taking into account the wind, the ship's capacity, and the intended destination. Like accelerating a journey with favorable winds, the 2017 Tax Cuts and Jobs Act expands the estate tax exemption, acting as a powerful tailwind to move the ship forward. The prudent application of trusts and provisions for inheritance functions as the ship's rudder, directing the riches securely to its designated harbors and guaranteeing that it upholds the heirs, encourages accountability, and supports charitable endeavors. Ensuring that the riches transported across these waterways leaves a lasting legacy and positively benefits the coastlines of future generations is just as important as reaching the objective on this journey.

What retirement plan options does Ohio State offer its employees, and how do these plans compare in terms of contribution rates and employer matching? Understanding the distinctions between the ARP Defined Contribution and OPERS Traditional Pension Plan is important for making informed retirement choices.

Retirement Plan Options: Ohio State offers several retirement plan options, including the ARP Defined Contribution, OPERS Member-Directed, OPERS Traditional Pension (Defined Benefit), and OPERS Combined Plan (Defined Benefit and Defined Contribution). Employees contribute 10% of their eligible compensation to these plans, and Ohio State contributes 14%. In the ARP, employees manage their investments, while OPERS plans involve a mixture of defined benefit formulas and employee contributions(Ohio State_Retirement P…).

How does the vesting schedule work for contributions made to the various retirement plans at Ohio State? Employees should have a clear understanding of when they become fully vested in employer contributions and how this affects their retirement benefits.

Vesting Schedule: For the ARP plan, both employee and university contributions are immediately vested. In the OPERS Member-Directed plan, employee contributions are immediately vested, but university contributions are vested over five years. For the OPERS Traditional Pension and Combined plans, vesting occurs in stages: employees become 33% vested after 5 years and 67% vested after 10 years(Ohio State_Retirement P…).

In what ways can Ohio State employees manage their retirement accounts following termination or retirement, including options for lump-sum distributions or rolling funds into other retirement vehicles? Exploring these options can help employees better plan their financial future post-employment.

Account Management Post-Employment: Upon termination or retirement, employees can either leave their balance with the provider, roll it over into another qualified account, or withdraw funds as lump sums, fixed-period payments, or annuities. OPERS also offers joint or multiple life annuities(Ohio State_Retirement P…).

Can you elaborate on the investment choices available under the Ohio State ARP Defined Contribution plan, and how does the investment risk differ from that of the OPERS plans? Itâ€™s essential to assess how employees can maximize their retirement savings through sound investment strategies.

Investment Choices and Risk: In the ARP Defined Contribution and OPERS Member-Directed plans, employees choose from various investment options, bearing all the associated risks and fees. In contrast, OPERS manages the assets in the Traditional Pension and the DB portion of the Combined Plan, so employees assume no investment risk(Ohio State_Retirement P…).

What criteria must be met for employees at Ohio State to qualify for disability benefits under the pension plans, and how are these benefits structured? Understanding the nuances of these benefits can be crucial for staff planning for unforeseen events.

Disability Benefits: Employees can qualify for disability benefits under OPERS after five years of service. Benefits are calculated based on service credits in the Traditional Pension and Combined Plans. The ARP plan offers no additional disability benefits beyond the vested account balance(Ohio State_Retirement P…).

How does the interaction between Ohio State's retirement plans affect employees' eligibility for Social Security benefits, and what considerations should be taken into account? This is a significant aspect that can influence long-term retirement planning.

Interaction with Social Security: Participation in Ohio State's retirement plans may reduce Social Security benefits for eligible employees due to offset provisions. This can impact long-term retirement planning, so employees should consider this when making decisions(Ohio State_Retirement P…).

What are the tax implications of withdrawing funds from Ohio State's retirement plans, and how can employees effectively plan for these taxes? Insights into the tax-deferred nature of contributions can aid in financial decision-making.

Tax Implications: Contributions to Ohio State’s retirement plans are made on a pre-tax basis, meaning federal and state taxes are deferred until the time of withdrawal. Early withdrawals (before age 59½) may incur additional tax penalties(Ohio State_Retirement P…).

Are there any additional benefits or programs available to employees through Ohio State that can complement retirement savings, such as health care benefits after retirement? These additional offerings can significantly enhance overall retirement security.

Additional Benefits: Ohio State provides health care, disability, and survivor benefits to employees enrolled in the OPERS Traditional Pension and Combined Plans. Access to a Retiree Medical Account for healthcare expenses is available in some plans(Ohio State_Retirement P…).

How can Ohio State employees get in touch with the Human Resources department to learn more about retirement plan options, contribution limits, and other benefits? It's crucial for employees to know the right channels to obtain help regarding their retirement planning.

Human Resources Contact: Employees can contact the Office of Human Resources or their selected ARP provider for more information on retirement plan options, contribution limits, and other benefits. Ohio State also provides resources on its HR website(Ohio State_Retirement P…).

What changes, if any, are expected in Ohio State's retirement plans for the upcoming year, especially concerning contribution limits and other regulatory adjustments? Staying informed about potential changes can help employees proactively adjust their retirement savings strategies. These questions aim to provide a comprehensive understanding of retirement plans and associated benefits at Ohio State, facilitating employee engagement and informed decision-making.

Expected Plan Changes: Any changes to contribution limits or plan adjustments will likely be communicated through Ohio State’s HR department. It's essential for employees to stay updated through official HR channels to proactively adjust their retirement strategies(Ohio State_Retirement P…).