Point Of Interest Q1 '18 | Trust Point
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Point Of Interest Q1 ’18

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Updated February 22, 2018

Trust Point

We are proud of Trust Point’s century of service reputation of excellence. But, our approach and purpose has always been focused on the future. Not just our own company’s future - but, more importantly, our client’s futures.

NEW TAX LAW AFFECTS ESTATE PLANS

Big changes are going into effect in 2018! The new Tax Cuts and Jobs Act, signed into law on December 22, is the most significant overhaul of the U.S. Tax Code since 1986. Beginning Jan 1, 2018, the new tax bill doubled the estate- and gift-tax exemption from $5.6 million per person to about $11.2 million per individual and $22.4 million for a married couple. These increased exemptions are scheduled to sunset effective Jan. 1, 2026, with reversion back to the current amounts, inflation-adjusted.
By doubling the exemption amount, Congress has reduced the number of estates to which the estate tax will apply annually to only a few thousand. Of course, an eventual repeal of the increased exemption in a subsequent Congress is very possible, as Washington has tinkered endlessly with the estate tax in the past. Thus, changes could certainly occur before 2026, depending on control of Congress and the White House.
It may make sense for all clients to reexamine estate-planning documents. Many people probably never updated their wills or revocable trusts when the exemption increased from $1 million to $5 million a few years ago. The doubling of the exemption makes it even more critical than before to evaluate existing documents.
For high-net-worth individuals willing to make family gifts, it is important to note that the gift-tax exemption amount also doubles in 2018. This increase provides a huge opportunity for high-net-worth families to fund trusts for children and grandchildren. Individuals or married couples with a net worth significantly greater than the new exemption amounts may wish to consider an aggressive family-gifting plan.
Lastly, it could be dangerous to assume that doubling the estate-tax exemptions will solve every estate-planning issue. Estate planning for the majority of people has never been solely about taxes, but also concerns the seamless flow of assets where and when you want that flow to happen. One has only to look at the contest over the estate of pop star Prince, who died in 2016 with no will, to see the value of estate planning.

TAX LAWS DISCUSSED BUT UNCHANGED
While the 2017 Tax Act made numerous changes impacting individuals, estates, and businesses, several existing provisions affecting our clients did not materially change:
1. Good news: the step-up in tax cost basis to fair market value at the date of death for heirs of estates of any size is retained.
2. Despite rumors of significant reductions, which could have effectively killed 401(k) plans, the final bill maintained the current annual pre-tax contribution limits.
3. The favorable system for taxing long-term capital gains and qualified dividend income remains intact, except that Congress decided to set income thresholds at which the favorable 15% 20% tax rates apply.
4. Bad news: the 3.8% surtax from the Affordable Care Act on net investment income for individuals with modified AGI over $200,000 (or $250,000 for married couples) was retained.
5. Senate had proposed elimination of the specific identification method on selling marketable securities.

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Trust Point

We are proud of Trust Point’s century of service reputation of excellence. But, our approach and purpose has always been focused on the future. Not just our own company’s future - but, more importantly, our client’s futures.