Estate Planning and Tax Reform: Wealth Transfer Structures Under the New Tax Law

Description

The new tax reform law represents the most sweeping changes to the U.S. income tax code in over 30 years, changes that will impact virtually every aspect of American society. For estate planning counsel and advisers, the new law creates significant challenges in wealth transfer strategy and emphasis.

The law alters some critical provisions in the estate and wealth transfer tax system. By doubling the amount exempt from estate tax, tax reform provides transfer tax planning opportunities, and also requires estate planning advisers to focus more than ever on income tax minimization on the transfer of accumulated assets.

The law's impact on estate and wealth transfer planning will likely yield unexpected results. Because many of its most far-reaching provisions are scheduled to sunset in 2025 (unless extended by a future Congress), planners face significant uncertainty in constructing long-range estate plans. Further complicating matters for estate advisers is the likelihood that some states will keep lower estate tax exemptions than the new federal amount. Planners will need to structure wealth transfer plans that take state estate and gift taxes into account while planning within the federal framework.

An additional challenge for planners will be reconciling past transactions and structures to the framework of the new law. The IRS has provided only limited guidance on how it will apply the new exemption amounts to prior reporting of taxable gifts that exceeded the previous exemption amount.

Likewise, specific existing wealth transfer structures may not be tax-efficient under the new provisions. Estate planning advisers need to have a thorough grasp of the permanent and non-permanent changes to wealth transfer taxes brought about by the new law.

Listen as our authoritative panel provides a critical first look at the wealth transfer implications of the new tax reform law.