Congress has just passed, and President Trump is expected to sign the Tax Cuts and Jobs Act. Although continued study of the bill will undoubtedly reveal additional opportunities I can share with you and your family, I wanted to provide some of my immediate impressions.
If you own a business or are thinking about starting one, contact us immediately. Relying on old rules of thumb or ignoring this monumental change in business taxation as you make business plans could mean paying enormous amounts of unnecessary taxes.
Many of the new, business-oriented deductions have specific rules to qualify. Although, this bill has been the subject of intense media discussion, don’t rely on television programs, blog posts, or press releases. Instead, contact us so we can analyze how to maximize your benefits under the bill.
The doubling of the estate, gift, and GST tax exemptions to $10 million per person ($20 million per couple) opens a significant, once-in-a-lifetime opportunity for you to protect more assets than ever. Combined with the IRS’s withdrawal of the anti-discounting section 2704 regulations earlier in 2017, tax reform opens the door for dynasty trusts, family partnerships, discounted gifts, and other strategies that could shield entire fortunes for your beneficiaries.
Although the estate tax and GST tax exemption doubles on January 1, 2018, to $10 million per person, this increased exemption expires on December 31, 2025. You may be tempted to wait, given that seven years may feel like forever. But remember that this tax legislation is likely to be heavily modified if the political pendulum swings in the other direction. (The clock is already ticking steadily towards the 2018 midterms and 2020 Presidential election.) Of course, we have tools that can build flexibility into your plan, including trust protectors, decanting powers, and other strategies to deal with future changes. But those future strategies only work to preserve options if we implement plans while the exemption is available.
If you have any concerns about how the death tax will impact your family, give us a call today so we can maximize the opportunities afforded by the new bill. And, if in doubt, call now and let’s strategize while there’s still time.
The new cap on state and local tax deductions may mean that we need to consider a special income-tax saving trust, called a non-grantor trust. If you have a business, an asset, stock, or anything else that has substantially appreciated in value that you’re considering selling, give us a call first so we can see whether a non-grantor trust would benefit you. This is a sophisticated strategy, but we are here to assist you with it.
The bill provides no reduction in personal capital gains rates (which remain 20% for most assets and taxpayers) and no repeal of the 3.8% net investment income tax. Charitable planning remains an excellent option to help reduce these taxes. If you are considering making a significant charitable gift, a charitable remainder trust, lead trust, private foundation, or other strategy may be an excellent option to save income and estate taxes while benefiting a cause you care about.
The increase in the standard deduction ($12,000 for individuals, $18,000 for heads of household, and $24,000 for married couples filing jointly) and removal of some above-the-line deductions (moving expenses and alimony) may help save you some time at tax-time. Plus, the bill retains the deductions for 529 plans, IRAs, 401(k)s, and Health Savings Accounts (HSAs), offering you several opportunities to reduce your taxes while building financial security for the future if you choose to save and invest some of the tax savings.
Planning to minimize income taxes is a balancing act. We are available now to answer your questions about tax reform and work with you to take full advantage of the opportunities. I know you’re busy, so I want to make it as easy as possible for us to work together. Here are the next steps:
First, schedule an appointment with me as soon as possible. I’d like to get time on the calendar so that we can take a look at the options that are available to you and your family.
Second, find your estate planning portfolio. If you can’t find it, let us know, and we will send you another one. Now’s a great time to review your plan anyway. When we meet, I want to make sure that anything we do to help you take advantage of tax reform still achieves your overall planning goals and not just your tax-saving goals.