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Trust Matters MARCH 2025
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HEADS UP! 2026 Could Bring Major Tax Changes
Like many of you, I feel a huge sense of relief as tax season winds down, and I wrap up my filings. This time of year, I can’t help but start looking ahead to summer — making plans, setting goals, and enjoying a break with family. But even as I prepare for the fun, I know this is also the perfect time to think about what’s on the horizon, especially when it comes to taxes. With significant changes potentially coming in 2026, a little planning now could save us all headaches — and money — down the road. What’s Changing in 2026? In 2017, the Tax Cuts and Jobs Act (TCJA) introduced sweeping changes to federal tax law, including doubling the standard deduction and lowering tax rates for most income levels. Unless Congress renews the Act, these benefits will expire in 2025. Here’s what this could mean for all of us: • Higher Tax Rates: Tax brackets will likely increase across the board, which means most of us could end up paying a higher tax rate on the same income. For example, today’s 22% bracket may rise to 25%, and other brackets will adjust similarly. • Lower Standard Deduction: The standard deduction, which essentially doubled under the TCJA, would revert to lower pre- 2017 levels. This change means more of our income could be taxed, especially for filers who rely on the standard deduction instead of itemizing. • Reduced Estate and Gift Tax Exemptions: The federal estate and lifetime gift tax exemption is $13.61 million per individual for 2024. If the TCJA expires, this would drop to roughly $7 million in 2026. Assets exceeding this reduced threshold would
remain subject to the current federal estate tax rate of 40%, which could result in substantial tax liabilities for larger estates. Looking at these potential adjustments, it’s clear that 2026 could bring significant changes for many of us. Fortunately, we can protect what we’ve worked so hard to build with the right strategies. Strategies to Get Ahead Before 2026 Optimize Deductions If the TCJA expires, the standard deduction will drop to pre-2017 levels. If you rely on the standard deduction, consider deferring deductible expenses, like charitable contributions or medical costs, to 2026. This could help you maximize tax savings when itemizing becomes more beneficial. Consider Roth IRA Conversions With current lower tax brackets in place, 2025 could be the ideal time to convert traditional IRAs to Roth IRAs. Doing so allows you to lock in today’s lower tax rates and avoid paying higher taxes on withdrawals after 2026. This strategy works particularly well if you anticipate your tax rate increasing in the future. Review Estate and Gift Planning Early estate planning is critical for those with substantial assets. With the expiration of the TCJA, the current $13.61 estate and gift tax exemption per individual would be cut in half in 2026. Funding an irrevocable trust in 2025 could help shield your estate from a substantial tax burden, helping protect your legacy. Let’s Prepare Together These strategies assume the Tax Cuts and Jobs Act will expire at the end of 2025. If Congress extends it, that’s great! Either way, these can be beneficial moves regardless of what happens. Acting now ensures you’ll stay ahead of the curve and be prepared for any changes.
If you’d like to discuss your situation, I would love to help you evaluate your options and determine the best steps forward. And if you need assistance with broader retirement planning, I encourage you to give us a call or visit our Retirement Management office at RetirementMO.com.
-Francisco Sirvent
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Crack the Code Benefits and Drawbacks of the Latest College Aid Forms
Applying for college financial aid has been a moving target recently amid changes in federal rules. One new loophole is good news for families, however. For the first time, grandparents can set aside money in tax-sheltered accounts to help pay a grandchild’s college expenses without jeopardizing the student’s eligibility for other financial aid.
eligibility. This is bad news for families with multiple children who want to attend college at the same time.
In another change, the latest FAFSA substitutes a new measure, the Student Aid Index (SAI), for the Expected Family Contribution measure used in the past. The SAI ranges from -1500 to 999999, and the lower it is, the greater the likelihood a student will get need-based financial aid. States’ 529 plans, named for Section 529 of the Internal Revenue Code, function like a kind of 401(k) account for education by deferring taxes on investment gains on savings for designated educational purposes. States began to develop these plans in the 1980s to encourage families to save for college, and all states now sponsor some version of a 529 plan. Other changes include expanding the number and potential size of Pell Grants. The maximum Pell Grant will rise to $8,145 in the 2025–2026 academic year from $7,395 in 2024–2025. While the SAI is calculated based on a student’s family size, income, and assets, eligibility for Pell Grants also considers a family’s financial standing according to federal poverty guidelines. In other changes, the revised FAFSA relies on federal tax information provided by the IRS rather than answers provided by applicants. It also asks fewer than 50 questions, compared with 108 in the previous form. While many people labor over the form’s detailed questions, the most common mistake is not filling out the FAFSA at all. This omission excludes students from eligibility for numerous subsidized loans and grants, scholarships, and other aid from the college or university they attend. Many students wrongly assume they won’t be eligible for aid because they or their parents make too much money or their grades aren’t high enough. Plenty of circumstances can qualify applicants for grants and awards, from being the first in their family to attend college to being in the military, being unemployed, or planning to major in a specific in-demand subject. With numerous sources of financial aid in play, the potential rewards of completing the FAFSA are well worth the time invested!
The benefits could be significant for families planning, saving, and working together toward college-funding goals.
The primary tool to qualify for federal aid and other sources of help is the Free Application for Federal Student Aid (FAFSA). The latest version of FAFSA does not require students to report distributions from grandparent-owned 529 college savings plans. In the past, those distributions could reduce a student’s financial aid by half of a grandparent’s contribution. Family members, including grandparents, are playing a growing role in covering soaring college costs. Undergraduate students cannot borrow more than $5,500–$12,500 a year in federal subsidized and unsubsidized loans, depending on their school year and whether they rely on their families. This nearly always falls short of the average annual public university tuition of $11,000 for in-state students, $24,500 for out-of-state students, and $43,500 for private college students. Parents are shouldering an increasing share; 11% take out federal parent PLUS education loans, borrowing an average of $40,000 per parent as of 2020. Other changes in the FAFSA form have subtler implications for families. The government no longer considers the number of students one family has in college simultaneously to determine
“The latest version of FAFSA does not require
students to report distributions from
grandparent-owned 529 college savings plans.”
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When a disaster strikes, it’s not just your home and immediate family you need to protect; your furry family members also need you to keep them safe. By preparing for the unexpected and ensuring you have the right supplies, lines of communication, and arrangements, you can help reduce the stress and uncertainty for you and your furry companions. Get ready to be all paws on deck with these tips to keep your pets safe during emergencies. Be Purr-pared With a Plan Make sure you include your pet in your household’s overall emergency plan. You will avoid stressful scrambling at the last minute when a disaster occurs. If you need to evacuate, account for all pets so they don’t get hurt or lost in the chaos. Not all public shelters and hotels allow animals to stay, so determine a safe place to take them. It’s also important to assign a friend, neighbor, or family member to care for your pets if you cannot. If you have not microchipped your pet, now is a great time. Shelters can scan microchips to determine a lost animal’s home and owner’s contact information. Pack for Your Pets Create an emergency kit for your pets that includes supplies they need to survive a disaster. You should have a few days’ supply of food, water, and any medications your pet needs. Ensure you have a backup leash and collar and copies of your pet’s registration. Include grooming items and sanitation tools like pet litter and paper towels. Items like favorite toys or your pet’s blanket can comfort them in stressful situations like an evacuation. Travel-Ready Tails Make sure you are ready to transport your pet in a travel carrier quickly. Place their carrier open in an area your pet is comfortable with, like a favorite napping spot. You can add a familiar blanket and toy inside to reduce their stress and use treats to encourage them to go inside. Make a mental note of your pet’s behavior during stressful times so you know where their go-to hiding spots are. Keeping Pets Safe in Emergencies All Paws on Deck
TAKE A BREAK
AQUAMARINE BASKETBALL BLUEBIRD CLOVER GREEN IDES LEPRECHAUN MADNESS
PISCES SPRING TANGERINE TULIP
Not Your Mom’s Corned Beef and Cabbage
Inspired by AllRecipes.com
Ingredients
• 1 (4 lb) corned beef brisket with spice packet • 3 qts water • 1 onion, quartered • 3 carrots, cut into large chunks
• 3 celery stalks,
cut into 2-inch pieces
• 1 tsp salt • 2 lbs red potatoes, halved • 1 small head of cabbage, cut into eighths
Directions 1. In a large pot or Dutch oven over medium-high heat, combine corned beef, spice packet contents, water, onions, carrots, celery, and salt. Bring to a simmer (skimming off any foam on top). 2. Cover pot, reduce to low heat, and let simmer for 3 hours until meat is fork tender. 3. Add potatoes to the pot and let simmer uncovered for 30 minutes or until potatoes are al dente. 4. Add cabbage along the edges of the meat and on top. Cover and let simmer until cabbage is tender, 20–30 minutes. 5. Place meat on a cutting board and let rest for 10–15 minutes. After meat has cooled, slice against the grain. 6. Add to a large serving bowl, ladle vegetables and broth over top, and serve.
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INSIDE THIS ISSUE
1
Get Ahead of the 2026 Tax Shift
2
Loopholes and Pitfalls in College Financial Aid Rules
3
Not Your Mom’s Corned Beef and Cabbage
Prep Your Pets for Disasters
4
How the DOL’s Final Rule Protects Retirement Investors
A NEW ERA FOR ERISA The Final Rule Transforms What It Means to Be a Fiduciary
For more than 14 years, the U.S. Department of Labor has been trying to determine a new definition of a “fiduciary” under the Employee Retirement Income Security Act (ERISA). A fiduciary provides investment advice for a fee to employee benefit plans. Under ERISA, someone is a fiduciary if they have control over managing
or using a plan’s assets, provide investment advice for a fee, and have responsibility for managing the plan. Since 1975, these discussions were only considered “investment advice” if they adhered to a five-part test. However, this past September, the Department of Labor released new regulations called the Final Rule that redefines what it means to be an investment advice fiduciary. With this recent change, the five-part test goes out the window. The Final Rule expands the definition of who can be considered a fiduciary. Someone is a fiduciary if they regularly provide investment recommendations and advice to retirement investors for a fee. That advice must be based on the investor’s needs and reflect expert judgment that serves the investor’s best interests. They must also state that they are acting as a fiduciary when giving advice;
however, if you’ve previously received one- time advice, that could now be considered fiduciary advice. That’s a lot of information to swallow, and by now, you’re probably wondering how this will affect the average person. In most cases, these changes will only affect those acting as fiduciary advisors and retirement investors, including participants, beneficiaries, IR owners (Ingersoll Rand Inc.), and anyone else involved with an ERISA plan. Through the Final Rule, you should receive better advice that puts your interests first, providing more transparency about recommendations and any fees involved. It should also create greater accountability for advisers, brokers, insurance agents, and anyone else acting as a fiduciary. All in all, this is a great change for those who interact with fiduciaries. You can rest assured knowing the advice you receive will benefit you and your investments.
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