Estate Tax Uncertainty Should Be a Catalyst For Drafting Flexibility

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By Beckett C. Horner, Esq.

If there is one prevailing certainty regarding the Transfer Tax system in 2017, it would actually be its uncertain future. Politicians an pundits have been wrangling with the possibility of repeal since President Trump’s election on November 9th, 2016, but no one knows with any assurance what will occur. Part of Candidate Trump’s campaign platform was a public call for the repeal of the estate tax, and in its place the implementation of a “realization at death” tax regime which would require highly appreciated assets lose their stepped-up basis at death, and would require heirs to pay capital gains tax to achieve such a step-up. The Republican plan would seem to repeal the estate tax, while maintaining the gift tax as a proper backstop to assignment of income schemes during life. Neither plan, however, is likely to make it through the congressional channels without compromise and alteration, so tax professionals and tax payers alike are left wondering what to do.

The linked-to article below by Kevin Matz, a contributor to WealthManagement.com, explains in greater detail the uncertainty surrounding the future of transfer tax legislation.

http://www.wealthmanagement.com/estate-planning/reimagining-estate-planning-2017-part-1

The main issue is that most current estate plans force the client’s assets up to the annual exemption amount ($5.49M in 2017) into a credit shelter trust. ¬†This leads to questions as to how to administer such an estate plan if there is no estate tax and therefore no annual exemption amount, i.e. even if there is no estate tax and no need for a credit shelter trust, your estate may still be locked up in a trust.

If you would like to discuss your estate plan and whether it affords the flexibility needed in the current uncertain estate tax environment, please do not hesitate to contact me via email at bhorner@rlloydlaw.com or via phone at (772) 234-5500.