Traveling for the Holidays? – What You Need to Know About Travel Insurance
In the wake of recent mass flight cancellations by Southwest Airlines, many travelers might be concerned about what happens if their holiday travel plans become cancelled or interrupted by issues with a travel provider or issues on their end. Here are some things to know about travel insurance. Trip Cancellation/ Trip Interruption Insurance Trip cancellation insurance will reimburse you for any covered travel expenses arising from a need to cancel your trip prior to departure. Covered expenses might include airfare, hotel costs, the cost of a cruise or others depending on the policy. Trip interruption insurance is similar to trip cancellation insurance, but this coverage kicks in if you are on your trip but need to cancel your trip while it is in progress. Typical reasons for cancelling or interrupting a trip that are generally covered include: The unexpected illness of you or a traveling companion that prevents travel or the continuation of the trip. A physician’s verification may be needed. The hospitalization or death of a family member. Circumstances that are beyond your control such as flight cancellation or the cancellation of another key component of the trip. A natural disaster either at the home of the traveler or at the trip destination. A legal obligation such as jury duty or if the traveler is required to appear at a court proceeding as a witness. Baggage Insurance Baggage insurance covers the loss of your luggage or personal belongings while traveling. This coverage may be offered as part of a broader travel insurance policy and is also offered by some major travel credit cards. There are often limits on the coverage including: A per item limit. A per person limit. A per item limit for certain high-end items. You will generally need to notify local authorities which would occur when filing a claim with an airline. You may need to provide original receipts for very expensive high-end items. In the case of baggage delays, the policy may cover the cost of purchasing replacement items such as clothing. Will Travel Insurance Cover COVID -19 and COVID -19 Related Disruptions? Whether or not a COVID-19 related trip disruption is covered by your travel insurance will depend on the policy and the insurer. If this is a concern, such as with a major trip you are planning, it is best to check with your insurer upfront. Some policies offer a cancellation for any reason provision which would carry an additional cost. This might be a good idea, especially for a costly vacation trip. There could be COVID-19 issues that are unforeseen and that could result in travel bans or other disruptions. Another coverage to look for is emergency medical care for a traveler who becomes ill with COVID-19 while traveling. This is an option offered by some insurers as well. While a number of airline executives claim that vaccine mandates and other COVID-19 related issues will not disrupt holiday travel, the recent situation with Southwest Airlines was a wakeup call for many travelers. The holiday season is normally a prime time for weather-related travel disruptions, the addition of COVID-19 related issues means that travelers should be prepared for disruptions this year. Experts recommend that travelers know in advance the best ways to contact an airline if they need to rebook or if things otherwise change. Researching back-up flights is also a good idea. Obtaining travel insurance is also recommended this year as well. It is always a good idea for travelers to be prepared, but this has never been more true than for the 2021 holiday travel season. Be sure to know all of your options in advance in case a flight or other aspect of your trip is cancelled or disrupted. This can save a lot of aggravation and money if something does occur. Buying the appropriate type of travel insurance for your situation is a key component of being prepared this holiday travel season. Looking to build a financial plan based on your goals while considering market trends and risk factors? Click here to check out our approach to Wealth Management. Disclosure These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable — we cannot assure the accuracy or completeness of these materials. The information presented is not intended to constitute an investment recommendation for, or advice to, any specific person. The information presented here is not specific to any individual’s personal circumstances. To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances. The information in these materials may change at any time and without notice.
How to Maximize Year-End Charitable Giving
For those who are charitably inclined, this is a good time to look at charitable giving for 2021 to ensure that you get these contributions prior to the end of the year. Besides being a generous thing to do, charitable giving can be an integral part of your year-end tax planning. Deadlines for 2021 In order to be able to take advantage of any tax benefits from making a charitable contribution for 2021, the contribution must be made on or before December 31, 2021. Typically, receiving credit for a contribution for the current year means that the contribution was received prior to the end of the year, not just postmarked. Tax Benefits There are a number of potential tax benefits depending upon each taxpayer’s situation. These can include the ability to deduct the amount of the contribution for those who can itemize their deductions. Using distributions from an IRA to make a qualified charitable distribution to a charity can reduce the tax hit for some or all of their requirement minimum distributions. Tax-Efficient Charitable Giving Strategies Cash donations The ability to deduct charitable donations made with cash up to 100% of your adjusted gross income (AGI) enacted under the CARES Act remains in place for 2021. This means that for those who are able to do so, they give more than they might do in other years to achieve the maximum tax benefit for this year. Perhaps it makes sense to bunch contributions that you might make over several years into 2021 to take full advantage. Note the AGI limits are lower for gifting appreciated securities and other types of donations. Unused amounts in excess of these limits can often be carried over to a subsequent year, but it is always best to consult with your tax advisor on this. Gifting appreciated securities With the strength in the stock market in the second half of 2020 and so far in 2021, many investors may have a number of stocks, ETFs and mutual funds in their taxable portfolios that have appreciated in value. This strategy offers a double benefit. The market value of the securities on the date of donation will be the amount of your donation, which can be deducted for those taxpayers who can itemize. An additional benefit comes from not having to pay any capital gains taxes on the difference between your cost basis and the appreciated value of these securities. It’s important to confirm that the charitable organization is equipped to handle these types of donations. Qualified Charitable Distributions (QCDs) Anyone who has a traditional IRA account and who will be age 70 ½ during the year can take up to $100,000 from their account and use this money to make a donation to a qualified charitable organization. While there is no charitable deduction available for QCDs, the money will come out of the IRA tax-free. This can be a handy tool for those subject to RMDs who don’t need the money and who are charitably inclined. It can serve to reduce their potential tax bill. This can help those for whom the added income might increase their Medicare payments for subsequent years as well. Donor advised funds Donor-advised funds can be a solid vehicle for those who want to take an immediate tax deduction for a donation this year, but who want the ability to space out their contributions to one or more charitable organizations over a number of years. DAFs are investment pools that invest the donated money. Donations must be made to qualified charitable organizations. DAFs will generally charge an asset management fee. DAFs will generally accept gifts of cash, appreciated securities, art and collectibles and in some cases real estate. Legislative Matters to Be Aware Of The Accelerating Charitable Efforts Act could limit the tax benefits of donor advised funds in terms of the time allotted to make grants to charitable organizations and to the tax benefits from making donations to DAFs. President Biden’s Build Back Better Agenda includes provisions that would increase the long-term capital gains rates for those earning in excess of $400,000. For those who are charitably inclined and who hold appreciated securities in taxable accounts, this prospect can enhance the benefits of gifting appreciated securities to charities in 2021. Investors who are charitably inclined should get started now with their year-end giving plans to ensure that their gifts are received and reported in a timely fashion. If giving securities, you will need to allow time for the process to work. Contact your Wedbush advisor to help you determine if any of these techniques are right for your situation in 2021. Looking to build a financial plan based on your goals while considering market trends and risk factors? Click here to check out our approach to Wealth Management. Disclosure These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable — we cannot assure the accuracy or completeness of these materials. The information presented is not intended to constitute an investment recommendation for, or advice to, any specific person. The information presented here is not specific to any individual’s personal circumstances. To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances. The information in these materials may change at any time and without notice.
Estate Taxes: What You Can Do to Prepare for The New Proposed Estate & Gift Tax Changes
President Biden’s Build Back Better spending plan includes several changes to the current gift and estate tax rules currently in place. Many of these changes could be effective as early as January 1, 2022. Overview of Proposed Changes One proposed change would be to reduce the lifetime gift and estate tax exemption in half starting next year. The current exemption is $11.7 million ($10 million inflation adjusted), under the proposed rules the new exemption amount would be just under $6 million. This would essentially accelerate the sunset provisions on the estate tax exemptions that were supposed to happen as of January 1, 2026 under the Tax Cuts and Jobs Act. Another proposed change would impact the taxation of grantor trusts. Grantor trusts in place by the end of 2021 would be grandfathered as to the tax benefits of these trusts. Grantor trusts established after the end of 2021, or additions to an existing grantor trust, would now count as a part of the grantor’s estate and face other tax issues. Additionally, valuation discounts on the transfer of minority equity interests for partnerships and other private entities holding passive investments might be in jeopardy as well. Estate Tax Planning Issues Before Year-End 2021 As far as the potential reduction in the estate tax exemption, this might prompt some taxpayers to accelerate the gifting of assets to their heirs prior to year-end. However, any portion of the $11.7 million not used if the new law passes will be lost. For example, if you were to give $7 million to your heirs in 2021, the remaining $4.7 million would be lost to you if the rules change and the exclusion limit is lowered. This would also be the case under the current plans for the exclusion limit to revert to lower levels after the 2025 tax year. For those with estates that will be smaller than this or even than the proposed new limits this is not a big deal. For those who are wealthier and who are not in a position to take full advantage of the current limits in 2021, they will need to revisit their future estate planning strategies. In the case of a grantor trusts, the proposed rules would grandfather trusts established and funded prior to the effective date of the new rules if passed. This would also apply to related promissory notes. We anticipate that many estate planners and wealth managers will be busy with wealthy clients looking to put these trusts in place and related planning work prior to the end of 2021. Charitable Giving A Charitable Lead Annuity Trust (CLAT) is similar to a Grantor Annuity Trust (GRAT) except that the payments are directed to a charity. Anything remaining after the term of payments would revert to family members without being considered a gift. It is unclear whether or not CLATs would be impacted by the proposed new rules. This uncertainty applies to some other types of trusts as well. For those considering a CLAT, it probably makes sense to get this in place prior to year-end to avoid any limitations that might surface in the final rules if passed. How You Can Prepare Many investors meet with their advisors towards year-end in most years. With the potential changes outlined above, plus a number of others in the works, these meetings take on added importance this year. If you are considering a grantor trust, a large lifetime gift, using valuation discounts to pass on certain private investments or a host of other estate planning options you may want to get these plans in place prior to the end of 2021 to avoid changes that could be enacted as early as January 1, 2022. Moreover, you will want to sit down with your advisor team to determine if any of these strategies are the best way to proceed. It can be a bad idea to take action just to beat a deadline if those actions are not in the best interest of your overall situation and objectives. This is a good time to contact your Wedbush advisor to discuss your overall year-end planning. Looking to build a financial plan based on your goals while considering market trends and risk factors? Click here to check out our approach to Wealth Management. Disclosure These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable — we cannot assure the accuracy or completeness of these materials. The information presented is not intended to constitute an investment recommendation for, or advice to, any specific person. The information presented here is not specific to any individual’s personal circumstances. To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances. The information in these materials may change at any time and without notice.