Although the conditions are not settled, changes to our federal tax laws will be implemented in the coming months. Upon announcement, the details are likely to lead to significant and immediate changes in people’s estate plans, especially for people who own small businesses or farms. The immediacy of the willingness to adapt to these changes in tax law will be magnified if tax increases are applied retroactively.

Due to the uncertainty of the details of the changes to the tax law, it is incredibly difficult to take action now to reduce our taxes under these new laws. So, in many cases, the wait is prudent at this time. Nonetheless, there are a handful of steps that can be taken right now to prepare for changes in tax law in general, regardless of their details.

First, determine where you stand. A personal / business balance sheet (nothing fancy or formal) listing all – literally all – of your assets by category and value and all liabilities in a similar format can give you a sense of where you are now, so you can (quickly) know what to do when details of tax law changes are announced.

Second, consider investigating tax-exempt investments. For example, interest earned on money loaned to many municipalities is not subject to tax. Various tax-exempt government bonds and Roth IRAs will become more attractive investments when the tax rate increases. Of course, only “earned income” can be used to fund a Roth IRA, so those considering early retirement may need to consider some income earning ability in order to use certain investment tools. tax exempt.

Third, in the same way, be prepared to investigate tax-deferred investments such as traditional IRAs and many employer-sponsored retirement plans. When tax rates rise, deferring taxes to a later date in life when your income may be lower (even though tax rates remain high then) can save you money. .

Fourth, for some people, it may be time to ‘bite the bullet’ to pay taxes on certain assets / investments now when tax rates are relatively low.

In other words, it may be time to withdraw corporate assets, pay tax, and plan to save / defer taxes in the future (often through adjusted bases on those assets to the to come up). If this is a reasonable consideration for you or your business, conversations with your top advisors about it should be arranged immediately to increase the likelihood of completion before the end of the year.

Fifth, if your net worth exceeds around $ 3 million, it may be time to consider donating, charitable giving, or otherwise profiting from (relatively) large amounts (11, $ 5 million per person, per life) of tax exemption before these limits automatically decrease to around $ 6.5 million in 2026 and possibly to $ 3 million even earlier under changes in tax law currently under consideration. However, this type of gift should always be coordinated with professional advice so that future chances of saving on gift / inheritance taxes are not lost.

Lee R. Schroeder is a Licensed Ohio Lawyer with Schroeder Law LLC in Putnam County. He limits his practice to business, real estate, estate planning, and agriculture in Northwestern Ohio. He can be reached at [email protected] or 419-659-2058. This article is not intended to serve as legal advice, and specific advice should be sought from the licensed lawyer of your choice based on the specific facts and circumstances you are facing.