Colorado
Estate Planner David A. Krueger publishes first article in instructional
series, this time on estate tax law
In this
comment, David A. Krueger addresses the issue of estate tax law based on the “Tax Cuts and Jobs Act” (TCJA).
In the first article of his series of
Instructional Articles, Colorado & Texas Estate Planner David A. Krueger
addresses the issue of estate law tax pursuant to the Tax Cuts and Jobs Act
(TCJA).
To
summarize the law, “The Act to provide for reconciliation pursuant to
titles II and V of the concurrent resolution on the budget for fiscal year
2018, Pub.L. 115–97, is a congressional revenue act originally introduced
in Congress as the Tax Cuts and Jobs Act (TCJA), that amended
the Internal Revenue Code of 1986. Major elements of the changes include
reducing tax rates for businesses and individuals; a personal tax
simplification by increasing the standard deduction and family tax
credits, but eliminating personal exemptions and making it less beneficial
to itemize deductions; limiting deductions for state and local income taxes
(SALT) and property taxes; further limiting the mortgage interest deduction;
reducing the alternative minimum tax for individuals and eliminating
it for corporations; reducing the number of estates impacted by the estate tax
…. For deaths occurring between 2018 and 2025, estates that exceed
$11.2 million are subject to a 40% estate tax at time of death, increased
from $5.6 million previously. For a married couple aggregating their
exemptions, an estate exceeding $22.4 million are subject to a 40% estate
tax at time of death …” (Wikipedia, https://en.wikipedia.org/wiki/Tax_Cuts_and_Jobs_Act_of_2017#Estate_tax,
footnotes omitted)
Experienced
estate planner David Krueger discusses the role of estate planning in light of
recent changes to Federal tax law.
One of the
biggest changes to the existing law is the temporary rise of the individual
estate and gift tax exemption to $11.2 million until 2025. The change,
implemented by the “Tax Cuts and Jobs Act” (TCJA), represents a substantial
increase from the previous exemption limit.
The
continuing rise of the individual exemption in recent years and the
transferability of the exemption between spouses means that only a very small
segment of the population will need advance planning to save on Federal estate
taxes. “This does not diminish the importance of other aspects of estate
planning”, notes Mr. Krueger. “For example, a comprehensive estate plan would
not only address how properties should be distributed upon death but also provide
for unexpected events such as incapacity and disability. Without advance planning in place, such
unfortunate event may necessitate a court proceeding for guardianship or
conservatorship to settle the myriad of issues that may arise in such
situations. A good estate plan will deal
with many different possible contingencies and try to ensure that there is a
plan in place that reflects the wishes of the individual creating the plan in
each situation.”
Mr.
Krueger goes on to explain that it is important to periodically review these
estate plans with a qualified attorney.
Major changes to applicable laws, regulations, or new court decisions
can all have enormous impact on an individual’s estate plan. The best way to ensure that your plans are
consistent with your wishes is to be diligent and regularly review them with a
qualified attorney. Everything from
changes in legal landscape to changes in circumstances may require periodic
updates to an individual’s estate plans.
For
example, some estate plans may provide that grandchildren get assets equal to
the maximum allowable under the exemption to the generational skipping
tax. When the exemption was low, such
planning was done to ensure that some portion of the estate would go tax free to
the grandchildren by utilizing the exemption.
With a substantial increase in generational skipping tax exemption under
the TCJA, such planning language would need updating and could otherwise wreak
havoc with the original intent of the testator or trustor. These types of
unintended consequences that may result from a change in law shows the need for
ongoing review and update to estate plans.
The
full instructional article is published on the Blog of Mr. Krueger at https://DavidKruegerBlog.blogspot.com
*** David A. Krueger (Texas & Colorado) concentrates his practice in all areas of tax planning and asset protection planning for closely-held businesses and individuals.
