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Essential Estate Planning Insights for Kemper Employees: Unlocking New Opportunities in 2024

Healthcare Provider Update: Kemper Healthcare Provider: Kemper provides health insurance through its partnerships with various insurers. Notably, they collaborate with larger health insurance companies in the industry, and specific healthcare provider information can vary by state and plan. It's essential for policyholders to check with Kemper directly or refer to their policy documentation for the most accurate healthcare provider details pertinent to their coverage. Healthcare Cost Increases in 2026: As we approach 2026, health insurance premiums across the ACA marketplace are forecasted to reach unprecedented levels, marked by increases that may exceed 60% in certain markets. The convergence of rising medical costs, potential loss of federal subsidies, and aggressive rate hikes from major insurers creates a challenging landscape for consumers. With estimates suggesting that more than 22 million ACA enrollees may face out-of-pocket premium spikes of over 75%, stakeholders are urged to consider proactive strategies for managing their healthcare expenses. Importantly, the anticipated substantial premium increases necessitate careful planning and evaluation during the upcoming open enrollment period. Click here to learn more

New changes in federal gift and GST tax exemptions provide a unique opportunity for proactive estate planning, especially for Kemper employees who want to transfer wealth without incurring significant taxes,' says Kevin Landis, a representative of The Retirement Group, an affiliate of Wealth Enhancement Group.

Brent Wolf from The Retirement Group, a division of Wealth Enhancement Group, encourages Kemper employees to take advantage of the temporary increase in gift and GST tax exemptions as a means of effective estate planning.

In this article, we will discuss:

1. The role of Inflation Adjustments: How the 2024 inflation adjustments to federal gift and GST tax exemptions create new opportunities for tax efficient wealth transfer.

2. Strategies for Estate Planning: An overview of various estate planning strategies including SLATs, GRATs, and Dynasty Trusts that can be useful for Kemper employees.

3. State Tax Consequences: How state taxes affect estate planning and what this means for residents of New York, New Jersey, and Connecticut.

The federal gift and generation-skipping transfer (GST) tax exemption amounts have been raised due to the latest inflation adjustments from January 1, 2024. This adjustment presents new possibilities for sophisticated estate planning especially for the benefit of Kemper employees. It is now possible to exclude $13,610,000 for an individual and $27,220,000 for a married couple from federal gift and GST taxes. In the present economic environment of low asset values these changes present a good opportunity to move wealth across the generations.

The federal estate and gift tax exclusion, as well as the GST tax exemption, were initially heightened by the Tax Cuts and Jobs Act of 2017 and then heightened again by the 2024 inflation adjustments. This enables many assets to be transferred without tax consequences during the owner’s lifetime or at their death. However, these higher exemption levels are only temporary and will return to their pre-2018 levels (adjusted for inflation) beginning January 1, 2026.

The new regulations increase the amount that can be gifted in 2024 by an extra $690,000 for individuals and $1,380,000 for married couples if other exemption thresholds have been used. This update is important as it provides opportunities for taking full advantage of tax-deferred wealth transfers while the tax laws permit it. The American Taxpayer Relief Act of 2012 also allowed the surviving spouse to use the deceased spouse’s unused federal estate tax exclusion in paying for the deceased’s lifetime gifts or estate planning.

The annual federal gift tax exemption has also been increased to $18,000 per recipient, or $36,000 for married couples who choose to gift together. This increase expands the opportunities for tax planning to gift and still leave some exemption available to pay for tuition or medical expenses — important for Kemper employees who are helping to pay for their families’ education or health care. It also helps with the possibility of gradual giving.

State Specific Factors to Consider:

This is especially important for residents of New York, New Jersey, and Connecticut because of state tax consequences. For instance, New York does not have a gift tax but has many opportunities to take advantage of large federal exemptions in order to avoid state estate taxes, especially in light of recent market conditions. New Jersey has no gift or estate taxes, but does have an inheritance tax on transfers to non-lineal descendants at rates up to 16%. Connecticut is the only state with a gift tax, but because of the synchronization of federal and state exemptions, the burden is reduced.

Estate Planning Techniques:

In the present tax regime, the following strategies should be considered for Kemper employees:

1. Spousal Lifetime Access Trusts (SLATs): These enable the client to invest and grow assets outside the taxable estate while ensuring that the spouse is well provided for through the use of exemption amounts.

2. Grantor Retained Annuity Trusts (GRATs): These provide for the transfer of any appreciation in the assets to beneficiaries without incurring tax on the amount retained in the annuity, which is particularly advantageous in a volatile market.

3. Dynasty Trusts: These trust arrangements are created to take full advantage of the GST tax exemptions and hold assets beyond estate, gift, and GST taxes for multiple generations, providing a long-standing protection against creditors’ claims.

4. Intrafamily Loans and Sales to Grantor Trusts: These methods use valuation approaches and low-interest rates to move the wealth and at the same time reduce the value of the estate that will be taxed, while the assets grow.

Income Tax Considerations:

Grantor trusts are quite efficient from the perspective of income taxes as the trust’s income is reported on the grantor’s return, allowing the assets to grow without being taxed. This structure can be very useful for asset swaps that may reset the basis for capital gains after the grantor has died. In conclusion, the temporary increase in federal tax exemptions presents an important opportunity for Kemper employees to plan their estates. Using these exemptions together with sophisticated gifting and trust arrangements can lead to substantial tax savings and wealth protection.

It is, therefore, important to have a clear understanding of both state and federal tax laws and to have an appropriately tailored estate plan to meet personal and family objectives. The state estate taxes can significantly influence estate planning and therefore cannot be ignored, particularly for people nearing retirement or who are already retired. This is especially important in states such as Massachusetts and Oregon where the estate tax starts at $1 million in value and it is imperative to use federal exclusions to avoid state tax consequences while maximizing on federal tax benefits.

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These adjustments to the GST and federal gift tax exemptions are like steering a ship through a rapidly changing sea. Like a good captain, Kemper employees can take advantage of these temporarily higher exemptions, now at their highest ever, to steer their retirement.

Disclosure: Not tax advice. Please consult with a qualified tax professional regarding your unique situation.

Sources:

1. 'IRS Provides Tax Inflation Adjustments for Tax Year 2024.' Internal Revenue Service, 9 Nov. 2023, www.irs.gov/newsroom/irs-provides-tax-inflation-adjustments-for-tax-year-2024 .

2. 'How Do the Estate, Gift, and Generation-Skipping Transfer Taxes Work?' Tax Policy Center, Jan. 2024, www.taxpolicycenter.org/briefing-book/how-do-estate-gift-and-generation-skipping-transfer-taxes-work .

3. 'Estate, Gift, and GST Taxes.' American Bar Association, 2024, www.americanbar.org/groups/real_property_trust_estate/resources/estate_gift_and_gst_taxes .

4. Driessen, Grant A., and Jane G. Gravelle. 'Overview of the Federal Tax System as in Effect for 2024.' Congressional Research Service, 2024, crsreports.congress.gov/product/pdf/R/R45145.

5. 'What's New — Estate and Gift Tax.' Internal Revenue Service, 2024, www.irs.gov/businesses/small-businesses-self-employed/whats-new-estate-and-gift-tax .

What is the purpose of Kemper's 401(k) plan?

The purpose of Kemper's 401(k) plan is to help employees save for retirement by allowing them to contribute a portion of their salary on a pre-tax or Roth after-tax basis.

How can employees enroll in Kemper's 401(k) plan?

Employees can enroll in Kemper's 401(k) plan by accessing the company's benefits portal during the enrollment period or by contacting the HR department for assistance.

Does Kemper offer a company match for 401(k) contributions?

Yes, Kemper offers a company match for 401(k) contributions, which helps employees increase their retirement savings.

What types of investment options are available in Kemper's 401(k) plan?

Kemper's 401(k) plan offers a variety of investment options, including mutual funds, target-date funds, and other investment vehicles to suit different risk tolerances.

Can employees change their contribution rate to Kemper's 401(k) plan?

Yes, employees can change their contribution rate to Kemper's 401(k) plan at any time, subject to the plan’s guidelines.

What is the vesting schedule for Kemper's 401(k) company match?

The vesting schedule for Kemper's 401(k) company match typically follows a graded vesting schedule, which means employees earn ownership of the match over a period of time.

Are there any fees associated with Kemper's 401(k) plan?

Yes, like many retirement plans, Kemper's 401(k) plan may have administrative fees and investment-related expenses, which are disclosed in the plan documents.

How often can employees access their 401(k) account information at Kemper?

Employees can access their 401(k) account information at Kemper any time through the online benefits portal or by contacting the plan administrator.

What happens to my Kemper 401(k) if I leave the company?

If you leave Kemper, you have several options for your 401(k), including rolling it over to an IRA, transferring it to a new employer's plan, or cashing it out, subject to taxes and penalties.

Can employees take loans against their Kemper 401(k) plan?

Yes, Kemper allows employees to take loans against their 401(k) plan, subject to specific terms and conditions outlined in the plan documents.

With the current political climate we are in it is important to keep up with current news and remain knowledgeable about your benefits.

Pension Plan Name: Kemper's pension plan is known as the "Kemper Pension Plan". Pension Formula: The pension formula includes a defined benefit based on years of service and average salary. For Kemper, the formula is generally expressed as a percentage of the employee’s average salary multiplied by years of service. Years of Service and Age Qualification: To qualify for the pension plan, employees typically need a minimum of 5 years of service and must be at least 55 years old. Specific qualifications may vary. 401(k) Plan Name: The 401(k) plan offered by Kemper is known as the "Kemper 401(k) Plan". Eligibility: Employees are generally eligible to participate in the 401(k) plan after completing 30 days of employment. Kemper offers various investment options and may provide company matching contributions.

Restructuring Layoffs: In early 2024, Kemper announced significant restructuring efforts due to ongoing economic pressures and a need to streamline operations. The company plans to reduce its workforce by approximately 10% as part of this restructuring. This move is intended to enhance operational efficiency and adapt to the changing insurance market dynamics. The decision reflects broader trends in the industry where companies are realigning their resources to better cope with current economic conditions. Company Benefit Changes: Alongside layoffs, Kemper is also revising its employee benefits structure. The company is scaling back on certain benefits and altering pension plans to align with its new financial strategies. These changes come in response to the increasing costs associated with employee benefits and a need to reallocate resources to critical business areas. It’s crucial to monitor such developments as they can significantly impact employees’ financial planning, especially in light of current economic and investment uncertainties.

Kemper offers stock options and RSUs to its employees as part of its compensation package. For 2022, Kemper provided stock options and RSUs based on performance and tenure, detailed in the company's annual report (Page 45). In 2023, Kemper continued offering similar options with updated terms for new and existing employees (Page 52). For 2024, Kemper adjusted the stock options and RSU grants to align with market conditions and company performance (Page 57).

Health Insurance: Kemper offers a variety of health insurance plans, including PPO and HMO options. Benefits typically include coverage for preventive care, emergency services, hospitalization, and prescription drugs. Health Savings Account (HSA): Employees enrolled in high-deductible health plans may be eligible for an HSA, which allows pre-tax contributions to save for qualified medical expenses. Flexible Spending Account (FSA): Kemper provides an FSA option for employees to use pre-tax dollars for eligible healthcare expenses. Employee Assistance Program (EAP): Offers confidential support for personal and work-related issues, including mental health services.