As you’ve probably heard, the stimulus package was approved. There are many provisions within the bill,… two of which we believe relate directly to retirement and estate planning. Here are estate planning considerations for the 2020 stimulus package.

Stimulus Checks

If your adjusted gross income is less than $75,000 as an individual or $150,000 if married and filing jointly, you will qualify to receive (as a one-time payment) $1,200 per individual plus $500 per child under 17. This is based on your 2018 or 2019 tax returns, whichever was most recently filed. If you are retired and on social security, you qualify for a check as well.

What to do with this check is entirely up to you. The government is hoping that you’ll spend it to help boost the economy. However, you may decide to save or invest it instead. If you are still working and those funds are not critical for paying your everyday living expenses, you might consider doing the following with them instead.

  1. Gif the funds, under the annual gift exclusion.
  2. Add to your 401(k) or IRA, if you have not yet reached the allowable limit.
  3. Add to assets that belong to a trust

Retirement Plan Changes

If you need funds because your employer is shut down due to the Coronavirus pandemic, retirement account rules have been temporarily changed to grant access to additional funds. Before, you could only borrow up to $50,000 (and up to 50% of the balance) from 401(k) accounts. This limit has been increased to $100,000 and the 50% rule waived. As with previous 401(k) loans, you must make regular payments towards that loan. Before taking out additional loans, consider the impact on your overall retirement plan. Based on your age and the amount already saved, you may fall short of your retirement goals if you withdraw too much. 

Alternatively, the required minimum distributions from retirement accounts have been waived for 2020. So, if you are over 72years of age, you can leave more funds in your retirement accounts this year without facing a penalty.  This can be a good way to reduce your taxable income this year and save more for the future.

More Estate Planning Considerations for the 2020 Stimulus Package

If you own a small business, commercial real estate, or other entity covered by the 2020 Stimulus Package, there are additional opportunities for savings. For example, you can apply losses from 2018-2020 to offset income from the last 5 years. You can immediately write-off expenses for building improvements. There are also expanded deduction limits for business operating losses and expenses. Payroll taxes are also deferred. These are just a few examples of potential tax savings. Given these unique circumstances and the complexity of the Stimulus Package, be sure to consult with your tax advisor and accountant. Taking advantage of tax savings will help maximize the value of your estate.