Now that 2019 has arrived, your estate planning strategies need a rigorous review — and possibly some revisions and updating — before next year.
If you’re like most highly compensated individuals and business owners, you haven’t revised your estate and overall tax planning significantly since the new tax laws passed in late 2017. This year, it’s time to prepare for what could happen when the 2020 election rolls around.
Without a crystal ball, it’s impossible to know what may happen with tax laws. However, as with all financial matters, it’s important to prepare and protect your hard-earned assets.
Potential Estate Tax Exemption Changes
The tax law changes that passed in late 2017 failed in repealing the estate tax, but the exemption threshold virtually doubled. The estate tax exemption, currently at $11.4 million per individual and $22.8 million for married couples, as of Jan. 1, 2019, also applies to lifetime gifts as well as generation-skipping transfers.
These provisions are not scheduled to expire until December of 2025, at which time Congress could vote to extend them. However, depending on what happens in the 2020 election, a new administration could quickly implement tax law changes that negatively affect estate tax exemptions.
Potential Valuation Discount Restrictions
In 2017, the IRS and U.S. Treasury Department withdrew proposed valuation discount restrictions for interests in closely held entities, pursuant to an executive order.
The proposed changes to the regulation (specifically tax code Section 2704) were issued in 2016, under the Obama administration, and were specifically intended to eliminate (or significantly limit) both DLOC and DLOM. Their withdrawal was a substantial relief for family-owned businesses, estate planners and tax attorneys alike.
However, under a new administration, we could see these or similar restrictions reappear.
Estate Planning for the Unknown
Although no one knows when or if any of these potential scenarios could come to pass, crossing your fingers or leaving it to chance is not worth the risk.
What steps should you take this year to prepare for a worst-case scenario?
The answers depend on your assets and how you have your estate structured. To leverage the current estate tax exemption, you could consider moving assets now — although retaining access to them may pose a challenge. You’ll likely need to explore different trust structures as well as the tax basis and appreciation levels of various assets.
This is also a good time to review any of your older trusts, to identify any that could benefit from a change in structure.
Finally, review any recent changes to your state’s tax laws that may have taken effect at the beginning of the year. Your estate plan could potentially benefit from any such changes.
Cantley Dietrich provides asset protection and estate planning services. We assist with wills, trusts and complex estate plans, preserving as much of your asset portfolio as possible while helping ensure that you remain in compliance with all applicable laws and regulations.
Contact us today to learn more or to schedule an estate planning consultation with one of our tax attorneys.
NOTE: This article is for informational purposes only and should not be construed as providing legal advice. Use of this site does not create an attorney-client relationship. Contact an attorney to obtain legal advice.