SIDEBAR Spring 2018 - 28

MONTGOMERYBAR.ORG

SIDEBAR FEATURE

Post Trump Tax Cut:
Estate Planning For The Rest of Us
By Rebecca Sallen, Esq.

T

he largest tax reform in over three decades has now been
signed into law. Considering the effects of the "Tax Cuts
and Jobs Act" (Act) which became law on December 22,
2017, many are asking whether estate planning is still relevant.
The Tax Cuts and Jobs Act doubled the exemption from federal
estate taxes from $5.6 to $11.2 million for individuals and $22.4
million for married couples. As in prior years, these exemption
rates are indexed for inflation, but now using a chained consumer
price index approach. The Tax Policy Center estimates that
approximately 11,310 individuals dying in 2017 will be subject to
the estate tax of which only 5,460 estates will owe tax after credits
and deductions. Portability of a deceased spouse's unused exclusion
remains available, so that spouses with a combined estate up to
$22.4 million in value at the time of the survivor's death will not
pay any federal estate tax with the proper planning and estate tax
return elections. With this dramatic increase in the exemption and

Delaware Valley Golden Retriever Rescue

Tuesday, Aug. 7, 2018
RiverCrest Golf Club
and Preserve
Phoenixville, PA

Score a hole-in-one for great
dogs in need by becoming a
Golden Golf Classic sponsor!
Promote your business or passion for dogs
with sponsorship levels that start at $250!
Sponsorship levels starting at $1,500
include player registrations!
Advertise in our program:
$200 quarter page or $50 for single line
With over 4,600 DVGRR dogs adopted, you'll be
advertising to a loyal, tail-wagging audience
while supporting a great mission!

Visit www.DVGRR.org for sponsor or
player details and email
Inza@dvgrr.org with any questions.
Le a rn m o re & re g i s ter:
28 SIDEBAR

w w w.DVGRR.org

even fewer clients subject to paying federal estate tax, the focus
on estate planning has shifted.

FLUCTUATING GOALS
As taxable estates have moved from $600,000 in 1997 to
$1 million in 2002 to today's current rate, prior plans often
reflected a desire to save money on taxes. This was accomplished
by reducing the size of an estate through various techniques.
The Act is scheduled to revert in eight years to $5 million for
an individual, adjusted for inflation. In 2026, the exemption
will likely be in excess of $6 million, significantly above most
clients' estates. As a result, the specter of federal taxes is replaced
by other concerns.
Many clients want to make lifetime gifts so that they can
see the beneficiary enjoy it while they are alive. Gifting property
prior to one's death reduces the size of one's estate, but forfeits
a step-up in basis and creates taxable income for the heirs when
they sell the property. Instead of encouraging clients to gift
money to their children or grandchildren, attorneys should
emphasize making gifts with high basis assets.
The higher tax exemption alleviates estate tax concerns which
allow clients to focus on non-tax reasons for planning such as
protecting and preserving assets. These non-tax reasons are an
opportunity for attorneys to differentiate themselves and offer
value to their clients.

REVISIT OLD PLANS
Attorney should contact their former clients to make them
aware of how the Act may affect their plans. Existing estate
plans that were created to save money on estate taxes may no
longer operate as intended. This is especially true if there were
multiple trusts established at death based on formula clauses
involving the estate tax exemption amount. Trusts drafted with
a typical formula clause for a married couple may have funded a
credit shelter trust for children using the full federal exemption.
Without revising these plans, the result would leave less than
originally expected to the surviving spouse or even nothing at
all. Older trusts tend to contain now unnecessary restrictions
on the survivor's control over trust assets. In addition, unrevised
trusts may incur unnecessary capital gains at final distribution
since the step-up in basis would not be available at the death of
the surviving spouse.
https://montgomerybar.org/ http://www.DVGRR.org http://www.DVGRR.org
SIDEBAR Spring 2018

Table of Contents for the Digital Edition of SIDEBAR Spring 2018
