Estate Planning Opportunities Arise with Passage of Tax Cuts and Jobs Act (TCJA)

The Tax Cuts and Jobs Act (TCJA), which came into effect on January 1, 2018, is the most significant overhaul of the tax code since 1986. Although it was meant to simplify the tax code, it is very complex and will undoubtedly be subject to ongoing modifications and interpretations. The TCJA affects nearly every aspect of income tax and estate tax law. Accordingly, this affords new tax planning opportunities for people with estates of all sizes. However, since some of the new provisions sunset (expire) at the end of 2025, it is imperative that those interested in taking advantage of the new tax and estate planning opportunities do so quickly, as it may be a “use it or lose it” scenario for many people.

One of the most well-known changes enacted via the TCJA is the doubling of the estate tax, gift tax, and generation skipping tax exemption to $11,180,000 per person. This is one of the provisions that sunsets in 2025. Once it sunsets, the exemption level will drop back down to $5,000,000 per person. For individuals with estates likely to exceed $5,000,000, it is imperative that they meet with their estate planning attorney sooner rather than later, because planning techniques may be able to be utilized prior to 2025, which could avoid estate and gift taxes of 40% on assets above $5,000,000 and up to $11,180,000. For example, married couples may choose to use a Spousal Lifetime Access Trust (SLAT) to take advantage of the increased exemption and also make sure they get a step-up in basis for income tax purposes at the death of each spouse. Single individuals may benefit from a Domestic Asset Protection Trust (DAPT), which may permit an individual to transfer funds to this self-settled trust to take advantage of the increased estate tax exemption, while also allowing the trustmaker to be the beneficiary. It is wise to act now to take advantage of these unique planning techniques, while they are still available.

Even if a person does not have an estate worth $5,000,000, there are planning techniques that can be utilized by the attorneys at Strauss Attorneys, PLLC to help clients save money and protect assets. Everyone needs a properly drafted estate plan, customized to ensure their individual goals are addressed. Common estate planning goals may include the desire to ensure that assets are left protected to their beneficiaries, that assets stay in the family, that assets are protected from divorce, disability, and Medicaid, and that the costs of the administration of the estate are minimized. Many of our traditional planning techniques are currently enhanced by the historically low interest rates, which makes the use of installment sales to grantor trust, intra-family loans, and split-interest gifts advantageous options for many clients who are not necessarily affected by the doubling of the estate tax exemption.

The big take away from the new tax law is that we have a unique opportunity to “use it or lose it” with respect to the doubling of the estate tax exemption. We also have the opportunity to take advantage of historically low interest rates to enhance traditional estate planning techniques to maximize the financial benefits to our clients and their beneficiaries. Given the time-sensitive nature of these changes, we strongly advise contacting us at your soonest convenience to ensure your estate plan is up to date and as comprehensive as it can be. Call Strauss Attorneys, PLLC today to schedule a consultation with one of our knowledgeable and experience estate planning attorneys today.