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Navigating Estate Planning for Arthur J. Gallagher Employees: Adapting to Federal and State Tax Changes

'Arthur J. Gallagher employees must remain proactive in updating their estate plans to reflect the evolving tax landscape, ensuring their financial legacy is preserved despite anticipated changes to exemption limits and estate tax regulations.' – Michael Corgiat, a representative of The Retirement Group, a division of Wealth Enhancement Group.

'Arthur J. Gallagher employees should consider adjusting their estate plans now to take advantage of current exemption limits before the anticipated reductions in 2026, ensuring that their assets are protected and efficiently passed on to future generations.' – Brent Wolf, a representative of The Retirement Group, a division of Wealth Enhancement Group.

In this article, we will discuss:

Upcoming Changes to Estate Tax Exemptions — How the reduction of the federal gift and estate tax exemption in 2026 may impact Arthur J. Gallagher employees' estate plans.
Strategies for Managing Different Asset Types — The tax implications of retirement accounts, taxable accounts, and real estate when structuring an estate plan.
The Role of Life Insurance in Estate Planning — How irrevocable life insurance trusts can help mitigate estate tax burdens and facilitate a smooth transfer of wealth.

Estate planning remains a complicated area of financial management for Arthur J. Gallagher employees. With major changes to federal tax regulations expected by the end of 2025, employees should consider adjusting their estate plans to accommodate possible changes.

Modifications to Exemption Limits' Effects.

At USD 13.99 million per person, the federal gift and estate tax lifetime exemption is currently USD 13.99 million. This exemption is expected to drop to around USD 7 million post-2025. This change creates concern among users of the existing higher gifting limits. But Treasury Department regulations from November 2019 say gifts made between 2018 and 2025 under the higher exemption amounts will not be affected even if the exemption amounts decrease after 2025. Source: Treasury Department:

Considered Aspects for Different Account Types.

The federal estate tax affects all account types differently - and that includes employees of Arthur J. Gallagher companies - because assets at death are taxable at the full market value. Assets in retirement accounts like traditional IRAs or 401(k)s are subject to income taxes and possible penalties if passed before death. Alternatively, assets in taxable accounts like real estate or brokerage accounts might be better suited to lifetime gifting strategies. Roth conversions may also improve tax efficiency on large assets in retirement accounts.

Considerations Regarding Real Estate and Estate Taxes.

Estate planning for real estate involves considering the property's value at death because it directly affects estate tax, whether the heirs plan to sell or keep the property. States such as Nebraska and Pennsylvania tax the heirs on inheritances. Arthur J. Gallagher employees planning their estates should structure plans that provide enough liquidity to cover estate taxes and other costs without having to liquidate large assets like real estate or family businesses, especially since estate tax exemptions could decrease in 2026.

Life Insurance & Estate Planning.

Life insurance proceeds are included in the estate's gross value. But the proceeds of a policy owned by an irrevocable trust are not included in the estate and are exempt from estate taxes. This setup allows structured planning using annual exclusion gifts to fund life insurance premiums through trusts - a useful tool for tax-advantaged wealth transfer - especially with estates that may be over federal exemption limits.

Reviewing Your Estate Plan

Arthur J. Gallagher employees should review and update their estate plans every three to five years or at the time of a major life event like marriage, the birth of a child, or a significant change in net worth. State or federal tax laws also should cause an evaluation of estate plans. Some whose plans might not reflect new laws or personal circumstances should consult an estate planning attorney, especially with tax changes coming soon.

Final Thoughts

Arthur J. Gallagher employees should take proactive estate planning steps to protect their legacy amid possible federal tax law changes. This means understanding how different asset types affect estate taxes, using trusts for life insurance, and maintaining estate liquidity to service tax obligations. Such strategies match financial planning to laws of today and tomorrow, preserving wealth for future generations.

Like navigating changing waters, Arthur J. Gallagher employees should update their estate plans to reflect changing tax landscapes. Actively preserving financial legacies through lifetime gifting or asset restructuring may help them weather changes in federal tax exemptions. A bit like a captain in shifting seas, careful preparation may lead an estate to its destination.

Articles you may find interesting:

Source:

1. 'Understanding the 2026 Changes to the Estate, Gift, and Generation-Skipping Tax Exemptions.' Husch Blackwell , June 2024, www.huschblackwell.com .

2. 'Estate Planning Considerations for Highly Appreciated Assets.' McLane Middleton , September 2024, www.mclane.com .

3. 'Estate Planning Now and for the 2026 'Double Exemption' Sunset.' Eide Bailly , July 2023, www.eidebailly.com .

4. 'Make Estate Planning More Tax Efficient By NOT Splitting Assets Evenly.' Michael Kitces , August 2024, www.kitces.com .

5. 'Estate Tax Exemption Sunset 2026: Key Questions Answered.' Merrill Lynch Wealth Management , March 2024, pbig.ml.com.

How can Gallagher, Flynn & Company LLP assist employees in understanding the advantages and disadvantages of cash balance retirement plans compared to traditional pension plans, and what factors should employees consider when determining which plan might be more beneficial for their unique financial situations within Gallagher, Flynn & Company LLP?

Understanding the advantages and disadvantages of cash balance plans: Gallagher, Flynn & Company LLP helps employees understand the benefits of cash balance retirement plans by comparing them to traditional pension plans. Cash balance plans offer higher contribution limits and more retirement savings while also reducing tax liability. However, employees must consider that cash balance plans distribute benefits evenly across all working years, which could lead to lower benefits than traditional pension plans that focus on the highest earning years(Gallagher_Flynn_Company…).

As an employee of Gallagher, Flynn & Company LLP, what specific criteria should individuals meet to be eligible for participation in a cash balance retirement plan, and how does Gallagher, Flynn & Company LLP ensure compliance with these criteria to maintain the planâ€™s integrity?

Eligibility for participation in a cash balance plan: Employees at Gallagher, Flynn & Company LLP must meet specific criteria to participate in cash balance retirement plans. These criteria typically involve employer contributions of 5-8% of the employee's salary. The company ensures compliance with contribution regulations by maintaining consistent cash flow to meet the annual contribution requirements(Gallagher_Flynn_Company…).

What are the current IRS contribution limits for cash balance retirement plans in 2024, and how does Gallagher, Flynn & Company LLP implement these limits to maximize the retirement savings of its employees, particularly those nearing retirement age or with higher incomes?

IRS contribution limits in 2024: The IRS contribution limit for cash balance plans in 2024 is over $200,000 for participants aged 60 or over. Gallagher, Flynn & Company LLP implements these limits by allowing employees to contribute significant amounts, especially those nearing retirement, helping them maximize their retirement savings while reducing their tax burden(Gallagher_Flynn_Company…).

In what ways can employees of Gallagher, Flynn & Company LLP expect their retirement benefits to be calculated under a cash balance pension plan, and how do the different factors affecting this calculation impact long-term financial planning for employees?

Retirement benefits calculation under a cash balance plan: Retirement benefits in a cash balance plan at Gallagher, Flynn & Company LLP are calculated based on the percentage of the employee’s salary credited to their account each year, plus an interest credit. This structure allows employees to plan for long-term financial stability, although it may result in lower overall retirement benefits compared to traditional pension plans due to the even distribution of contributions(Gallagher_Flynn_Company…).

What steps does Gallagher, Flynn & Company LLP take to communicate updates or changes in cash balance retirement plan regulations, and how can employees stay informed about their rights and obligations under these plans?

Communication about plan updates: Gallagher, Flynn & Company LLP regularly communicates updates and changes in cash balance retirement plan regulations through company-wide communications and financial advising services. Employees are encouraged to stay informed by contacting the company’s financial advisors or reviewing regulatory updates to understand their rights and obligations(Gallagher_Flynn_Company…).

Can you elaborate on the specific tax benefits associated with cash balance retirement plans that are offered by Gallagher, Flynn & Company LLP, and how these benefits compare to those available through other retirement plans?

Tax benefits of cash balance plans: Cash balance retirement plans at Gallagher, Flynn & Company LLP offer significant tax benefits by allowing for higher contribution limits than traditional 401(k) plans. These higher limits enable employees to lower their taxable income, making these plans advantageous for employees seeking to minimize tax liabilities and increase retirement savings(Gallagher_Flynn_Company…).

How does Gallagher, Flynn & Company LLP support employees who are considering transitioning from a traditional pension plan to a cash balance retirement plan, and what resources are available to facilitate this decision-making process?

Support for transitioning to a cash balance plan: Gallagher, Flynn & Company LLP provides resources and personalized financial advising to employees considering a transition from a traditional pension plan to a cash balance plan. The company ensures that employees understand the benefits and limitations of both plans, offering guidance to facilitate informed decisions(Gallagher_Flynn_Company…).

What strategies does Gallagher, Flynn & Company LLP recommend to employees who are in a position to "catch up" on their retirement contributions, particularly for those over the age of 40, to take full advantage of the higher limits associated with cash balance retirement plans?

Catch-up contributions: Employees over 40 at Gallagher, Flynn & Company LLP can take advantage of catch-up contributions due to the higher contribution limits of cash balance plans. The company recommends that older employees maximize these contributions to enhance their retirement savings and benefit from the associated tax advantages(Gallagher_Flynn_Company…).

How does Gallagher, Flynn & Company LLP determine the annual employer contribution rates for its cash balance retirement plan, and what factors influence the sustainability of these contributions in the long-term financial health of the company and its employees?

Annual employer contribution rates: Gallagher, Flynn & Company LLP determines the employer contribution rates for cash balance plans based on a percentage of employee salaries, typically ranging from 5-8%. These contributions are influenced by the company’s financial stability and commitment to providing robust retirement benefits for long-term employee financial health(Gallagher_Flynn_Company…).

If an employee at Gallagher, Flynn & Company LLP has additional questions about the cash balance retirement plans and needs further assistance, what are the best ways for them to contact Gallagher, Flynn & Company LLP to receive tailored guidance or information?

Contact for further assistance: Employees at Gallagher, Flynn & Company LLP who have additional questions about the cash balance retirement plans can contact the company through their financial advisors or reach out to their local offices for tailored guidance and support. The company’s financial team is available to provide personalized information and assistance as needed(Gallagher_Flynn_Company…).

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For more information you can reach the plan administrator for Arthur J. Gallagher at 2850 Golf Rd Rolling Meadows, IL 60008; or by calling them at +1 847-953-3000.