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Navigating Estate Planning for Baker Hughes Employees: Adapting to Federal and State Tax Changes

'Baker Hughes 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.

'Baker Hughes 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 Baker Hughes 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 Baker Hughes 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 Baker Hughes 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. Baker Hughes 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

Baker Hughes 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

Baker Hughes 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, Baker Hughes 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.

What strategies can Baker McKenzie implement to enhance the understanding of how Environmental, Social, and Governance (ESG) factors can impact pension scheme investments among its employees, and what resources are available for them to access this knowledge within the company?

Enhancing ESG Understanding among Employees: Baker McKenzie can enhance understanding of ESG factors impacting pension investments by implementing comprehensive training programs and workshops dedicated to ESG topics. They can develop internal resources such as newsletters, dedicated intranet sections, and regular updates about ESG impacts and opportunities. Additionally, engaging employees through interactive seminars with ESG experts and providing access to online courses or subscriptions to ESG-focused publications can foster a deeper understanding and commitment.

How is Baker McKenzie addressing the evolving legal landscape regarding pension schemes in the UK and other jurisdictions, particularly concerning the integration of ESG considerations into their investment policies, and what implications does this have for employees contributing to these pension plans?

Addressing the Evolving Legal Landscape: Baker McKenzie addresses the evolving legal landscape regarding ESG integration into pension schemes by staying abreast of legislative changes across different jurisdictions, particularly in the UK. The firm can ensure compliance and adapt strategies by integrating ESG considerations into investment policies, which is increasingly codified in laws such as the UK's amendments to pension investment regulations. This approach helps protect employee contributions by aligning pension investments with broader, sustainable financial interests that consider long-term environmental and social impacts.

In what ways can Baker McKenzie support employees in understanding their retirement options, especially regarding the impact of ESG policies on their pension benefits and investment choices, and what role do these policies play in enhancing the sustainability of retirement plans?

Supporting Employee Understanding of Retirement Options: Baker McKenzie can support employees by providing clear, accessible information on how ESG policies influence pension benefits and investment choices. Hosting regular financial planning sessions, creating detailed FAQs on pension management websites, and offering one-on-one consultations with ESG-knowledgeable pension plan advisors can help employees make informed decisions. Additionally, explaining the sustainability of retirement plans through these policies can reassure employees about the long-term viability and ethical grounding of their investments.

How does Baker McKenzie monitor and assess the climate-related risks associated with its pension schemes, and what measures are being taken to ensure that employees' retirement savings are effectively protected against these potential threats?

Monitoring and Assessing Climate-Related Risks: To monitor and assess climate-related risks, Baker McKenzie can implement robust risk assessment frameworks that integrate climate risk into the overall risk management strategy for pension schemes. This includes regular reviews of investment portfolios for exposure to climate risks, adopting climate risk assessment tools, and engaging with investment managers to prioritize ESG-compliant investments. Periodic reporting on these activities helps maintain transparency and reassures employees about the safeguarding of their retirement savings.

What are the key differences between the fiduciary responsibilities of trustees in Baker McKenzieâ€™s pension schemes in the UK compared to those in the US, and how do these differences reflect on the investment choices made on behalf of employees?

Differences in Fiduciary Responsibilities: The fiduciary responsibilities of trustees in Baker McKenzie’s pension schemes vary significantly between the UK and the US. In the UK, trustees are encouraged to consider ESG factors as financially material considerations, whereas in the US, recent regulatory changes have made it challenging to integrate ESG factors unless they directly relate to financial returns. These differences influence investment choices by aligning them more closely with regional legal frameworks and societal expectations.

How can Baker McKenzieâ€™s employees actively participate in discussions regarding investment strategies that incorporate ESG factors, and what processes are in place to collect employee feedback on how these strategies align with their values and preferences?

Employee Participation in Investment Strategies: Baker McKenzie can facilitate employee participation in discussing investment strategies by setting up regular pension committee meetings that include employee representatives, conducting surveys to gather employee opinions on ESG matters, and establishing feedback mechanisms through internal communication platforms. This inclusive approach ensures that investment strategies align with employee values and preferences, fostering a sense of ownership and engagement with the firm’s pension strategy.

What information can Baker McKenzie provide regarding the performance of its pension schemes with respect to integrating ESG factors into investment decisions, and how can employees stay informed about the outcomes of these strategies?

Performance of ESG-integrated Investment Strategies: Baker McKenzie can keep employees informed about the performance of pension schemes with integrated ESG factors by publishing annual sustainability reports, including ESG performance in regular pension statements, and holding informational webinars. Transparently sharing successes and areas for improvement in ESG integration helps build trust and encourages continued employee investment in ESG-focused pension options.

Given the importance of transparency in pension management, how does Baker McKenzie plan to communicate with its employees about the governance and performance of its pension schemes, particularly in light of the growing emphasis on ESG accountability?

Communicating Governance and Performance: Transparency in pension management is crucial, and Baker McKenzie can enhance this by regularly updating employees through digital newsletters, detailed annual reports, and interactive Q&A sessions with pension managers. Focusing communications on the governance structures in place and the performance outcomes of pension schemes, especially concerning ESG accountability, ensures that employees are well-informed and confident in the management of their pensions.

How can employees at Baker McKenzie leverage the company's resources to better prepare for their retirement, especially in understanding the long-term impacts of the companyâ€™s current pension strategies on their future benefits?

Leveraging Company Resources for Retirement Preparation: Employees at Baker McKenzie can leverage company resources for retirement preparation by utilizing detailed planning tools offered by the firm, attending retirement planning workshops, and accessing personalized advice from financial advisors specializing in pension management. The company can also provide case studies illustrating the long-term benefits of various pension strategies, including those incorporating ESG considerations.

For employees who wish to learn more about Baker McKenzieâ€™s pension plans and ESG initiatives, what is the best way to reach out to the company for more information, and what specific contact points are available to facilitate these inquiries?

Learning More about Pension Plans and ESG Initiatives: For employees interested in learning more about Baker McKenzie’s pension plans and ESG initiatives, the company should establish clear contact points such as dedicated email addresses, hotline numbers for pension plan inquiries, and scheduled office hours with HR representatives specializing in pension management. Providing easy access to this information through the company’s intranet and organizing regular informational sessions can facilitate effective communication and employee engagement.

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For more information you can reach the plan administrator for Baker Hughes at 17021 Aldine Westfield Rd Houston, TX 77073; or by calling them at +1 713-439-8600.