Client Relationship & Service
Congress’ major overhaul of the U.S. tax code brings important changes for taxpayers and corporations. But it also raises new considerations for advisors when it comes to estate planning.
Two areas specifically jump out with important planning opportunities between advisors, clients and tax professionals:
Opportunity #1: Take advantage of the increased lifetime exemption.
For clients with “plenty of surplus,” a lifetime gift can make a great deal of sense. Making lifetime gifts now allows clients with a net worth that vastly exceeds their spending to take advantage of the new law. There’s no hard and fast number that indicates when a client has “plenty of surplus.” But that would be a client with well in excess of $11.2 million individually or $22.4 million as a married couple.
Action items: Consider all the typical factors when planning for a gift, including the:
Beware: Claw backs. Take special care with clients — likely to live beyond 2026 — who make large gifts. There’s a potential situation where a client makes a gift with the available gift exemption ($11.2 million in 2018), who may still need to pay estate tax at the time of death. That’s due to the fact the gift exemption reverts back to $5.6 million in 2026. Congress left this inconsistency to the Internal Revenue Service to clarify.
Opportunity #2: Closely examine estates of $22.4 million and higher.
Clients’ estate plans should be reviewed with tax professionals on an ongoing basis. But a tax analysis is especially important — given the law changes — with clients who are married and have an estate value in the range of $22.4 million.
This level of assets, which would be reserved for a small number of clients, is where the greatest value can be created from the new tax law. An estate planning attorney should review the impact of the increased exemption on existing estate plans.
Beware: Disruption of the balance between trusts. The higher exemption can create unintended consequences for estates, including:
Action items:
What should advisors do? Use the tax law changes as an opportunity to re-engage with clients about estate plans. You might consider:
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