Healthcare Provider Update: Healthcare Provider for Select Medical Holdings: Select Medical Holdings operates primarily through its network of specialized rehabilitation hospitals and outpatient rehabilitation clinics. Their healthcare services focus on providing rehabilitation services for critical illness, physical therapy, and long-term acute care hospitals, making them a significant player in the healthcare sector. Potential Healthcare Cost Increases in 2026: As we approach 2026, significant increases in healthcare costs are anticipated, primarily driven by expected record hikes in Affordable Care Act (ACA) premiums. With states facing premium increases exceeding 60%, many individuals may experience out-of-pocket premium hikes of up to 75%, drastically affecting affordability. Contributing factors include the potential expiration of federal premium subsidies and rising medical costs from hospitals and providers. This perfect storm of financial pressures underlines the urgent need for consumers to prepare for the impending increase in healthcare expenses. Click here to learn more
New changes in federal gift and GST tax exemptions provide a unique opportunity for proactive estate planning, especially for Select Medical Holdings 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 Select Medical Holdings 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 Select Medical Holdings 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 Select Medical Holdings 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 Select Medical Holdings 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 Select Medical Holdings 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 Select Medical Holdings 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, Select Medical Holdings 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 401(k) plan offered by Select Medical Holdings?
The 401(k) plan offered by Select Medical Holdings is a retirement savings plan that allows employees to save a portion of their paycheck before taxes are taken out.
Does Select Medical Holdings match employee contributions to the 401(k) plan?
Yes, Select Medical Holdings provides a matching contribution to employee 401(k) accounts, subject to certain limits and conditions.
What is the eligibility requirement to participate in Select Medical Holdings' 401(k) plan?
Employees of Select Medical Holdings are typically eligible to participate in the 401(k) plan after completing a specified period of service, as outlined in the plan documents.
How can employees of Select Medical Holdings enroll in the 401(k) plan?
Employees can enroll in the Select Medical Holdings 401(k) plan by completing the enrollment process through the designated online portal or by contacting the HR department for assistance.
What types of investment options are available in the Select Medical Holdings 401(k) plan?
The Select Medical Holdings 401(k) plan offers a variety of investment options, including mutual funds, target-date funds, and other investment vehicles, allowing employees to choose based on their risk tolerance.
Can employees of Select Medical Holdings take loans against their 401(k) savings?
Yes, Select Medical Holdings allows employees to take loans against their 401(k) savings, subject to the terms and conditions of the plan.
What happens to the 401(k) plan if an employee leaves Select Medical Holdings?
If an employee leaves Select Medical Holdings, they have several options for their 401(k) savings, including rolling over the balance into an IRA or a new employer's plan.
Are there any fees associated with the Select Medical Holdings 401(k) plan?
Yes, there may be administrative fees and investment-related fees associated with the Select Medical Holdings 401(k) plan, which are disclosed in the plan documents.
How often can employees change their contribution rates to the Select Medical Holdings 401(k) plan?
Employees can typically change their contribution rates to the Select Medical Holdings 401(k) plan at any time, subject to the plan's guidelines.
Does Select Medical Holdings provide financial education regarding the 401(k) plan?
Yes, Select Medical Holdings offers resources and financial education to help employees make informed decisions about their 401(k) savings and investments.