Estate Planning – 2017 and Beyond

My original article for this week was to update readers on the DoL Fiduciary Rule that was set to be implemented in April of this year.  However, with the daily changes occurring regarding this hot topic, I felt that anything I wrote would probably be outdated and more than likely incorrect.  Therefore, I switched to another topic, estate planning, even though it too is subject to radical changes.  I’ll highlight some of those possible changes at the end of this article.

The IRS released the 2017 estate tax information late last year.  The estate, gift and generation skipping trust tax exclusion is now $5.49 million (up from $5.45 million in 2016). This exemption amount is indexed to inflation every year. What this means is that under the new exclusion amount, approximately 99% of all estates will not owe any federal gift or estate tax.

A popular feature of current estate planning used by trust and estates attorneys is the idea of portability of married couples’ estates. What this means is that a married couple may combine their estate tax exemptions, currently $5.49 million per spouse, thereby allowing married couples to either give away or leave nearly $11 million in combined assets.

Here is how the portability feature works: If the first spouse to die doesn’t use up his or her individual gift or estate tax exemption, the surviving spouse can use what’s left over. That gives the couple a total exemption of twice the individual exemption amount. They can share that total exemption amount in the way that provides the maximum tax benefit.  For example, if each member of a couple has $5 million in assets, and the first to die leaves everything to the other, no estate tax is owed, because property left to a spouse is tax free.  When the survivor dies and leaves $10 million to their children, no estate tax is due, even though the estate is over the exemption amount, because the estate can use some of the first spouse’s unused exemption.

A short history on portability of estate assets:  The portability feature was first introduced into law in 2010 for the tax years 2011 and 2012.  Then on 1/2/2013, then President Obama signed the American Tax Relief Act (ATRA), thereby making the portability law permanent.

The gift tax annual exclusion remains unchanged at $14,000.00 per gift. This means that a person may gift up to $14,000.00 per person to as many people as they want.  Married couples may jointly gift up to $28,000.00, or double the amount, to as many and whoever they want

The Future of Estate Planning

In a recent article titled “The Future of Estate Planning and Potential Repeal Under President Trump”, it states that “Recently both President Trump and the Republicans have called for a repeal of Federal estate taxes, and with the Republicans clean sweep in Washington, all eyes are on potential legislation to eliminate the estate and gift tax in 2017”.

To me, that means that, realistically, total repeal is by no means certain, at least not permanent repeal.  Why? The article goes on to say that “The lack of 60 Republican votes in the Senate means legislation to totally repeal the estate could be filibustered, and while estate tax repeal could be passed as budget reconciliation legislation with a simple majority, that’s only possible if it includes another infamous 10-year sunset provision thanks to the so-called Byrd rule.”

So, as of now, the world of estate planning has a lot of uncertainty about it. As the article states at the end, “It ultimately means that many popular estate planning strategies will remain in place, at least for now.”

But the most likely outcome may be that a substantial amount of estate planning slow down to a halt for the next several months, until it becomes clearer whether or how much focus, if any, the new administration will actually take regarding estate tax repeal.  Stay tuned!


2017-03-06T21:29:54+00:00 March 2nd, 2017|John N. Hamling|

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