In a Wall Street Journal article published last month, Philip DeMuth commented that Americans currently live in an ideal age of taxes due to President Trump’s 2017 Tax Cuts and Jobs Acts. Unfortunately, however, the tax advantages offered through various regulations passed by the current administration are scheduled to end on December 31, 2025.
Potential Changes to Estate Planning Laws
It is a good idea to review each estate planning during such uncertain times to make certain that assets are not placed at risk of unnecessary taxation. Some of the potential changes that could occur include:
- Increasing the maximum estate tax rate from 40% to 77%
- Placing substantial limits on estate planning techniques like Grantor Retained Annuity Trusts and Defect Grantor Trusts
- Reducing estate and gift taxes as well as generation-skipping transfer tax to $3,500,000 from $11,580,000
- Restricting the $15,000 annual gift exclusion afforded to unlimited donees to only two donees a year
Even though it can be difficult to predict what regulations might be passed into law, due to both the significant federal deficit and current political government, at least some of these regulations are likely to come to pass.
Estate Planning Techniques During Uncertain Times
Some of the helpful estate planning techniques that you should consider during this difficult time include:
- Passing on substantial gifts to loved ones is one of the best ways to make the most out of existing exemptions. Under existing regulations, even if exemptions decrease and previous larger exemptions are used, this amount is not utilized for estate taxes. Instead, the amount of assets that are subject to future gifts are reduced.
- Gifting to loved ones is one of the best ways to take advantage of current laws as well as remove these assets from the taxable estate, which increases both the discount and future appreciation of assets. Grantor Retained Annuity Trusts or Intentionally Defective Grantor Trusts are one of the best ways to take advantage of these amounts. While grantor retained annuity trusts are utilized to pass on substantial financial gifts to family members without facing gift taxes, intentionally defective grantor trusts are utilized to freeze certain assets to avoid estate taxes.
- Some charitable techniques are a good idea due to the potential for estate planning changes. While it might be uneasy passing on a substantial amount of assets as charitable gifts, anyone who has a taxable estate should appreciate that they will make a charitable gift to the federal government based on the amount of taxes in a person’s estate plan. Fortunately, estate planning strategies can be utilized to convert what would be classified as a charitable gift to the federal government into a charitable gift to heirs.
Speak With an Experienced Estate Planning
If you have questions or concerns about the estate planning process, one of the best steps that you can take is to speak with a knowledgeable estate planning attorney. Contact attorney Jim A Lyon today to schedule a free case evaluation.