By Libby Banks, The Law Office of Libby Banks, PLLC

A new year is upon us and with it changes in the law. Here are a few you may need to know about.

The Corporate Transparency Act Requiring Business Entities (including LLCs to File the Beneficial Ownership Information Report: The CTA required most LLCs and other small business entities to register and report beneficial owners by the end of 2024. In December, however, the U.S. District Court for the Eastern District of Texas granted a nationwide injunction and stayed compliance, stating that businesses need not register until further order of the court. If the Texas court or the appellate court on appeal lifts this stay, it is unclear how much time a business will have to comply with the law and register. If this is relevant to you, keep posted by watching my blog on my website, libbybanks.com, or subscribe to FinCEN updates at FinCEN.gov.

Required Minimum Distribution Rules for Inherited IRAs and 401ks: In 2020, Congress changed the rules for many beneficiaries who inherit IRAs. Suppose you are a child inheriting from a parent or are more than 10 years younger than the person you inherited the IRA from (and are not the person’s spouse). In that case, you likely have just 10 years to make distributions of the IRA. How we were supposed to do this has been the subject of much confusion, but this past year, the IRS finally gave us the rules for withdrawals. There are more nuances than I can enumerate here, but be aware that the rules differ based on whether the deceased person was required to make minimum required distributions upon death. Work with your wealth planner, a CPA, or another advisor with the knowledge and education about these new rules to be sure you are following them. Otherwise, you may have to pay taxes on the distributions and penalties for failing to follow the rules.

Increase in Annual Gift Tax Exclusion: For those who gift to children or grandchildren each year, the annual amount that can be given without reporting a gift will rise to $19,000 in 2025.

The Federal Estate Tax Exemption: In 2025, the federal estate tax exemption will rise to $13.99 million. For those who pass in 2025 with estates over this amount, the portion of their estate that exceeds the exemption limit will be taxed at 40%. However, that amount is scheduled to be reduced to approximately $7 million by January 2026 unless Congress acts to keep the higher exemption. We probably won’t know whether they will do so until late 2025.

What has NOT Changed: What hasn’t changed is that most adults need an estate plan. A Last Will and Testament by itself does not avoid probate – in fact, it may guarantee a probate. A revocable living trust is the best estate plan for most adults with a home and financial accounts. If you want to put a plan in place or update your current plan, call our team at 602-375-6752.