Law Office Merger
James A. Nepple will join Stanley, Lande & Hunter, a Professional Corporation, with law offices in Davenport and Muscatine. Jim will assume an Of Counsel position and continue to work full time. James A. Nepple is presently the managing partner of Nepple Law, PLC. His primary areas of practice are taxation, estate planning, trust administration, probate matters, retirement plans, business entities, and non-profit organizations.
Jim received his undergraduate degree from Creighton University in 1967, his law degree (with distinction) from the University of Iowa in 1970, and his Master of Laws in Taxation degree from New York University in 1982. He is admitted to practice law in Iowa and Illinois, and is a member of the American, Iowa, Illinois, Rock Island County, Scott County and Muscatine County Bar Associations. Prior experience includes a tax accountant position with the public accounting firm of Ernst & Young in Chicago, Illinois.
Jim has been quoted in both Iowa and Illinois newspapers, The Voice of Muscatine, and the Muscatine Magazine. He is also a frequent speaker on taxation, estate planning, business entities, and retirement plans for the Tax Section and Real Property and Probate & Trust Section of the American Bar Association, American Agricultural Law Association, Law Education Institute, Illinois State Bar Association, Iowa State Bar Association, and Muscatine County Bar Association. Among his notable achievements, he is an “A” rated lawyer in the Martindale-Hubbell Law Directory; is included in The Best Lawyers in America under Tax Law and Employee Benefits Law; is listed on Illinois Super Lawyer; is listed as a “Leading Illinois Attorney” under Trusts & Estate Planning Law, Tax Law, and Small Business Law; is a Fellow of the American College of Trust and Estate Council where he serves on both its employee benefits in estate planning committee and its business planning committee; and he is a Fellow of the Illinois and Iowa State Bar Foundations and a Fellow of the American Bar Foundation.
This will be effective at the end of December 2021 or the first part of January 2022.
The location of the office will remain at 615 Cedar Street, Suite 101, Muscatine, Iowa.
Current and Potential Tax Changes
September 7, 2021
This letter is intended to help keep you abreast of current and potential changes that could dramatically impact your existing estate plan. It is only provided as a courtesy and is not intended to establish or re-establish a client relationship.
Estate, Gift, and Income Tax Changes May be on the Horizon
The need to provide funding for governmental programs whether emanating from the COVID pandemic, anticipated infrastructure improvements, or a variety of agenda items, point to the enhanced possibility that tax increases and modifications to the estate, generation-skipping transfer (“GST”) tax, and gift tax regimes may become reality at any time. In addition, there are new proposals that would subject common estate planning transactions to income tax for the first time. Unfortunately, none of us have a crystal ball to predict what those changes might actually entail or when they will be enacted and become effective. Generally, a change in tax rate becomes effective in the year of enactment (which means a change in rates enacted in September may nonetheless be effective for gifts made back in January), while other changes historically have been made effective only on a prospective basis. But there have been proposals, and a lot of speculation, about retroactive changes this time around.
One proposal made in January 2021, by Senator Sanders, is commonly referred to as the For The 99.5 Percent Act. Another proposal made on March 29, 2021, by Senators Van Hollen, Booker, Sanders, Whitehouse, and Warren, is entitled the Sensible Taxation and Equity Promotion (STEP) Act. President Biden more recently proposed a new budget that included some changes similar to the Van Hollen Act. These proposals, if enacted in any form, could result in significant changes to the income, estate, GST, and gift tax regimes. They could transform planning dramatically.
In a nutshell, the 99.5 Percent Act, if enacted as proposed, could result in:
- The lifetime estate and generation-skipping transfer tax exemptions are being reduced from their current level of $11.7 million per person to $3.5 million (note that the exemptions are set to be reduced to $5 million per person, adjusted for inflation, as of 2026 even under current law).
- The current lifetime gift tax exemption (which is also presently tied to the current lifetime estate and generation-skipping transfer exemptions) of $11.7 million would be reduced to $1 million.
- The federal estate and gift tax rates which are currently capped at 40% could be increased for some to as high as 65%.
- Your annual gift tax exemption of $15,000 per person to whom a gift is made (“done”) will be limited on gifts to trusts. Currently you can make annual gifts of $15,000 per done to an unlimited number of recipients each year even to beneficiaries of trusts. The 99.5 Percent Act caps the amount at two times the annual exclusion on gifts to trusts. This may be particularly important to you, and the way your plan is currently intended to operate, if you are using your annual exemption to pay life insurance premiums. It may be advisable to make gifts now to fund insurance trusts.
- A limit on the number of years that dynastic trusts can avoid estate and/or generation skipping transfer taxation may be imposed at 50 years. Specifically, in year 50 the trust no longer would be GST exempt. This could reduce the desirability of dynasty trust in estate planning.
- Reduce certain discounts when valuing intra-family gifts. This might make it advantageous to complete transfers out of your estate before the law changes.
- GRATs will effectively be eliminated by the imposition of a minimum 10-year term for GRATs created after the effective date and require a gift of 25% of the value or $500,000.
- Irrevocable [grantor] trusts created after enactment will be fully included in the settlor’s estate. This could end the use of grantor trusts which have been the foundation of planning. For grantor trusts created before enactment, if they are funded after enactment (e.g., by post-Act gifts) they will be partially included in the grantor’s estate. This suggests that grantor trusts be created immediately.
The STEP Act, if enacted as proposed, could not only eliminate the current step up in basis at death rules (which are rules that generally modify a decedent’s historic tax basis in an asset to the fair market value based upon the value at death), but also result in the actual imposition of a capital gains tax on unrealized gains on the occasion of the transfer of such assets by gift, at death and potentially every 21 years after death for assets held in trust. Deemed realization could also occur on gifts and other transfers. Finally, trusts will be taxed on all unrealized appreciation every 21 years. A substantial concern with the STEP Act is that it is to be effective retroactively to January 1, 2021. Should this change be included in the final legislation, transfers you make in 2021 to avoid a Sanders’ Act, could trigger capital gains tax!
The above-referenced proposed changes could not only significantly impact your estate plan but eliminate estate planning options that you may have available today.
President Biden has included several proposed changes in his budget proposal. First, if your adjusted gross income exceeds $1 million, capital gains will be taxed at ordinary income rates. That could approximately double the tax rate from 20% to almost 40% (more if the 3.8% net investment income tax is included). This change could be made effective the date the proposal was announced, in April 2021. President Biden has also adopted the deemed realization events from the STEP Act. The gain will be triggered on gifts, death, and even on funding pass-through entities like partnerships and LLCs. This could have a dramatic impact on income and estate planning. But these changes, unlike the Van Hollen STEP Act, are effective in 2022.
Regardless of what components of these various tax proposals are enacted, you may still wish to engage us to help you evaluate opportunities currently available to you in light of the potential for changes in the law as well as to address any changes in your financial or family situation.
You should evaluate your estate plan now, as once legislation is passed it may be too late to implement options which may be currently available.
Please contact us if you would like to engage our services and schedule an estate planning review.
Nepple Law, PLC has been ranked in the 2020 U.S. News – Best Lawyers® “Best Law Firms” list regionally in two practice areas. Ranked firms, presented in tiers, are listed on a national and/or metropolitan scale. Receiving a tier designation reflects the high level of respect a firm has earned among other leading lawyers and clients in the same communities and the same practice areas for their abilities, their professionalism, and their integrity. Nepple Law, PLC received the following rankings in the 2019 U.S. News – Best Lawyers “Best Law Firms:”
- Metropolitan Tier 1
- Tax Law
- Metropolitan Tier 2
- Employee Benefits (ERISA) Law
Firms included in the 2020 “Best Law Firms” list are recognized for professional excellence with persistently impressive ratings from clients and peers. Achieving tiered ranking signals a unique combination of quality law practice and breadth of legal expertise.
For the 29th consecutive year, James A. Nepple has been named to the 2020 Edition of The Best Lawyers in America, the oldest and most respected peer-review publication in the legal profession.
The Best Lawyers list has been published for over three decades and has earned the respect of the profession, the media, and the public as the most reliable, unbiased source of legal referrals.
Divided by geographic region and practice areas, lawyers named to the list are reviewed by their peers on the basis of professional expertise and undergo an authentication process to make sure they are in current practice and in good standing.
Best Lawyers has recognized Mr. Nepple as a Best Lawyer in the following practice areas:
- Closely Held Companies and Family Businesses Law
- Employee Benefits (ERISA) Law
- Non-Profit/Charities Law
- Tax Law
- Trusts and Estates
Jim Nepple has once again been selected as a Super Lawyer for 2019. Mr. Nepple has been elected every year since 2005. This designation, awarded by peers, goes only to a select number of accomplished attorneys in each state. Mr. Nepple is one of only two attorneys outside of the Chicago area to have achieved this distinction.
A multi-phased selection process that includes independent research, peer nominations and peer evaluations determine who is named a Super Lawyer.
James A. Nepple has once again been selected as one of a handful of tax attorneys outside of the Chicago area to be one of the TOP Business & Corporate Lawyers in Illinois.
According to Leading Lawyers magazine, the list of Leading Lawyers and the LeadingLawyers.com website are different from other attorney search sites or lawyer directories. Lawyers cannot buy their way onto the list of Leading Lawyers. The list is the result of thousands of contacts with Illinois lawyers asking them which of their peers they believe comprise the top lawyers. Only those lawyers who are most often recommended qualify as Leading Lawyers.
The areas of practice in which Mr. Nepple is recognized as a Leading Lawyer are:
- Closely & Privately Held Business Law
- Employee Benefits Law
- Tax Law: Business
MARTINDALE-HUBBELL 2019 AV PRE-EMINENT RATING
James A. Nepple, Managing Partner of Nepple Law, PLC, has received the highest possible rating in both legal ability and ethical standards from Martindale-Hubbell.
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In 1930, the Martindale Company purchased the publishing rights to Hubbell’s Legal Directory, which contained a digest of state laws, court calendars and a selective list of lawyers and firms. The following year marked the first edition of the Martindale-Hubbell Law Directory, a two-volume set that combined the features of both predecessor publications.
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