February 15, 2018

Talking to an Attorney About the New Tax Law

Now is a good time to take advantage of the new tax law and review your estate plan. There are some questions that you should ask your attorney before making any new plans.

Whenever there are significant changes made to tax laws, it is important to review your estate plan to make sure you still have a plan that best benefits you under the law. Even minor changes to tax laws can have an impact on estate plans.

The tax changes recently signed into law are no exception.

Now is the time to go to an estate planning attorney and make sure your estate plan is still optimal for you and your family. There are a few things you will want to discuss with your attorney.

Recently, Forbes offered some suggestions of things to talk to your attorney about in "5 Questions to Ask Your Estate Planner After the New Tax Law," including:

You need to know if the new law effects your estate plan at all. The estate tax exemption limit has been doubled and you will want to know what that means for your estate.
If you are married, you will want to discuss what the new law means for spousal “portability” and how that could impact you and your spouse.
Many states tie their state estate tax exemption to the federal exemption and you will want to discuss whether yours is one of them.
Have the attorney review your plan to make sure it is still optimal for what you want to do, given the new laws.
Before leaving the attorney's office, ask the attorney when you should come back and review your plan again. Estate plans should always be periodically reviewed with an expert, in case there are other changes to the law that need to be addressed.

Reference: Forbes (January 9, 2018) "5 Questions to Ask Your Estate Planner After the New Tax Law."

January 15, 2018

New Tax Law Creates New Advantages

It might be wise to take a fresh look at your estate plan for new options.

Many estate plans will need to be changed to take advantage of the new tax laws, according to the Wills, Trusts & Estates Prof Blog in "A Gift from the New Tax Act: Kill That Trust."

One of the key changes for estate planning purposes, is that the estate tax exemption has been doubled.

Thais means people with estate plans that created trusts for the sole purpose of limiting their estate tax exposure may want to revisit their plans. They might now be better off revising those trusts or even getting rid of them altogether.

An estate law attorney can advise you on creating an estate plan that fits your unique circumstances and may include a trust or dealing with the doubling of the estate law exemption.

Reference: Wills, Trusts & Estates Prof Blog (Dec. 26, 2017) "A Gift from the New Tax Act: Kill That Trust."

December 7, 2017July 11, 2023

Tax Inflation Changes for 2018

Every year the Internal Revenue Service adjusts tax exemptions and deduction limits to keep them in alignment with inflation. The changes that are made can have a big impact on estate plans, even if the actual adjustments are relatively small.

The IRS recently announced some of those important changes. They could make a difference for people planning their estates, according to the Wills, Trusts & Estates Prof Blog in “Estate Planning Inflation Adjustments for Tax Year 2018 & 2017-2018 Priority Guidance Plan.”

Changes include:

• Lifetime gift tax exemption increased to $5.6 million.

• Annual gift tax limit increased to $15,000.

• Annual gift tax limit to a foreign spouse increased to $152,000.

• Estate tax exemption increased to $5.6 million.

• Failure to file a return within 60 days of due date, to result in a penalty of $215 or 100% of amount due, whichever is lower.

If you have questions about how these changes could impact your estate plan, visit an estate planning attorney.

Reference: Wills, Trusts & Estates Prof Blog (Nov. 8, 2017) “Estate Planning Inflation Adjustments for Tax Year 2018 & 2017-2018 Priority Guidance Plan.”

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November 8, 2017March 7, 2023

Section 2704 Rules to Be Withdrawn

When the Obama administration announced changes to the valuation discounts for family businesses for estate tax purposes, known as the Section 2704 rules, there was a lot of consternation.

Many estate and legacy plans would have to be completely reworked in order to comply with the complicated new rules. It was not absolutely clear how all of those plans could be reworked and how the rules would actually be enforced. This created headaches for many people.

The Trump administration has decided to change course, as Forbes reports in “Treasury To Withdraw Hated Estate Tax Valuation Rules.”

The Treasury Department announced that it will soon publish an official withdrawal of the rules, since they have decided the rules are unworkable. That means planners can continue to rely on previous valuation methods, which brings a lot more certainty about how to make legacy plans for now.

This does not mean the estate tax itself has been repealed. President Trump has indicated he wants to do so, but, in the meantime, it should help those people who are affected by the estate tax.

Of course, even without the Section 2704 rules, it is still a good idea to review any previously made plans to make sure they will still be effective as intended.

Reference: Forbes (Oct. 4, 2017) “Treasury To Withdraw Hated Estate Tax Valuation Rules.”

October 23, 2017March 7, 2023

GOP Tax Plan Includes Estate Tax Repeal

The Trump administration and Congressional Republicans are very slowly inching toward tax reform. It
has not always been clear what type of reforms they might be considering.

Many different possibilities have been discussed.

However, they have now released a joint framework that gives an idea of their main priorities.

Advocates for a repeal of the estate tax will be pleased to know that a complete repeal of the tax is
included in the framework, as Forbes reports in “Trump GOP Tax Reform Framework Calls For Estate Tax
Repeal.”

Despite including a repeal of the estate tax the framework is curiously silent on the gift tax, which
normally goes hand in hand with the estate tax.

If the ideas in the framework were eventually to become law, that would mean pre-death transfers
could still be taxed, while post-death transfers to the exact same people would not be.

Of course, releasing a framework for reform is not the same as passing legislation.

There is a long way to go before the estate tax is repealed and the issue is likely to be contentious in
Congress.

Reference: Forbes (Sep. 27, 2017) “Trump GOP Tax Reform Framework Calls For Estate Tax Repeal.”

October 18, 2017February 7, 2022

2018 Estate Tax Exemption Projections

The IRS has not yet announced what the 2018 estate tax exemption will be. However, expert analysts think there will be some slightly good news for wealthy people.

They predict that the exemption should increase to $5.6 million for a single person and more than $11 million for married couples.

At the same time, they predict that the annual gift tax exemption should also increase to about $15,000, as Forbes reported in “Estate Tax Exemption To Top $11 Million Per Couple in 2018.”

This should give wealthy people and their estate planning attorneys a little bit more flexibility, as they attempt to shrink estates to below the threshold.

While most people who might be affected by this exemption increase would prefer to see the estate tax repealed entirely, that is increasingly looking like it will not happen this year.

Congress has turned its attention to tax reform, but getting anything passed could be a long process and will likely continue into next year.

Repealing the estate tax is also controversial. If Democratic votes are needed to pass tax reform legislation, that might take the estate tax off the table.

If you have questions about your estate and how it might have an impact on the estate tax, then you should see an experienced estate planning attorney in your area.

Reference: Forbes (Sep. 15, 2017) “Estate Tax Exemption To Top $11 Million Per Couple in 2018.”

October 11, 2017

Estate Tax Repeal Could Hurt Charities

At first glance, it might not seem like there is much of a relationship between the existence of the estate tax and charities.

The former takes money from the wealthiest estates involuntarily and uses it to help fund government programs. The latter are entities that people voluntarily give money to, in support of causes that they think benefit society.

However, the two are very much related, as Bloomberg discusses in "GOP Plan to Kill Estate Tax Sets Up Charitable Giving Conflict."

The issue is that one of the most common ways to get around the estate tax is to shrink an estate to just below the estate tax exemption limit. A great way to do this is to give money to charity.

When the estate tax was temporarily eliminated in 2010, charitable giving was reduced by 37%.

This has many charities very nervous about the possibility that the estate tax could be eliminated again, as the Trump administration and Congressional Republicans would like.

Republicans are looking for ways to get around this problem by finding other ways to encourage
charitable giving.

It is not yet certain whether they will have the votes necessary to do that.

It is also not certain at this point whether they will have the votes to eliminate the estate tax either.

Reference: Bloomberg (Aug. 25, 2017) "GOP Plan to Kill Estate Tax Sets Up Charitable Giving Conflict."

July 24, 2017

Life Insurance Is Simple and Can Benefit Estate Plan

Estate and capital gains taxes can be avoided.

Wall Street has an enhanced life insurance method that benefits wealthy people and is becoming increasingly popular, according to Barron's in "New-ish Tax Planning Instrument Gathering Billions."

Life insurance is a popular estate planning tool used as a relatively simple way to even out inheritances between heirs or to provide needed cash for family members, after the policy holder passes away.

A policy is purchased, premiums paid and upon the death of the policy holder, cash is distributed to the beneficiary.

Since life insurance is a death benefit, the beneficiary does not have to pay income taxes on it when it is paid out as a lump sum.

Wall Street has an insurance dedicated fund as a complicated investment tool that gets treated for tax purposes in the same way as life insurance.

It allows people to invest money that is then managed by hedge funds, without paying any capital gains tax on the investment. When the investor passes away, the accumulated funds in the account are distributed to beneficiaries and have the same tax benefits as life insurance.

Insurance dedicated funds are not new, but they have recently started becoming more popular.

An estate planning attorney can advise you on whether an insurance dedicated fund will fit your unique circumstances.

Reference: Barron's (June 28, 2017) "New-ish Tax Planning Instrument Gathering Billions."

July 5, 2017

Forgotten Estate Taxes

Many people who think that there is no reason that they need to plan for the estate tax, will have estates that face large estate tax bills because they have not thought about state estate taxes.

When most people think about estate taxes, if they think about them at all, they think about the federal estate tax. That is the estate tax that receives most of the attention in the national media.

For most people that is the only estate tax they do need to worry about. It is the only one that could apply to their estate.

Most people do not need to worry too much about it, since their estates will be below the historically high estate tax exemption at the federal level.

Nevertheless, there are other forgotten estate taxes that can create problems as the Wills, Trusts & Estates Prof Blog points out in "Don't Underestimate State Estate Taxes."

Maryland and the District of Columbia have their own estate taxes, in addition to several other states.

These state taxes often have much lower exemptions than the federal government.

The estate of someone who has planned only for the federal estate tax, might have to pay a large and unexpected bill to these states to cover the state taxes.

As is the case when the federal estate tax has not been adequately planned for, not planning for state estate taxes can create problems for estates that have few liquid assets and thus no simple way to pay the bill.

Fortunately, planning around state estate taxes can be done with the help of an experienced estate planning attorney.

Reference: Wills, Trusts & Estates Prof Blog (June 8, 2017) "Don't Underestimate State Estate Taxes."

June 14, 2017

Consider a SLAT for an Uncertain Future

It is currently difficult to know what the best possible estate planning method might be in the near future, since tax reform is uncertain. A spousal lifetime asset trust can be used as a way to plan around that uncertainty.

Given recent events in Washington, it is understandable if wealthy people are more than a little nervous about their estate plans. Just as it appeared that Congress was about to turn its attention to long-promised tax reform, President Trump has been distracted by ongoing investigations into his campaign.

While a special counsel has been appointed to oversee that investigation, a continuing steady stream of leaks has kept the pressure on lawmakers. This casts doubt over their plans for tax reform, since it is a contentious issue that has many in Congress deeply divided.

It is not clear what the President wants on some of the key items of reform.

All of this makes it difficult for many wealthy people to know how effective their estate plans might be and how to make changes to them.

Recently, Wealth Management offered a solution to the uncertainty in the form of a spousal lifetime asset trust in "SLATs Provide Flexible Plans for Many Clients."

Like any other trust, SLATs do not have to go through probate. They also offer estate tax and capital gains tax benefits.

They key thing about them, is that they are an extremely flexible form of trust. They are more adaptable to changing circumstances than many other trusts.

That makes them a great tool for uncertain times, when no one can be certain what the tax future will look like.

If you are interested in a SLAT or want to know what your other current estate planning options are, talk to an estate planning attorney.

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Tag: Estate Tax