Florida Estate Planning and Probate Law Blog focused on recent case law and planning ideas.


With December 31, 2016, right around the corner, it is important to look at your year end personal tax and estate planning situation. With a Trump administration and a Republican-controlled Congress, much attention has been paid to the tax proposals in the president-elect’s Contract with the American Voter and the House Republicans’ Task Force for A Better Way to see how they match up. The key points that both proposals have in common, as they affect our tax and estate planning clients, include: • Elimination of the estate tax, although the Trump proposal states that “capital gains held until death and valued over $10 million will be subject to tax.” • Reduction of the maximum individual federal income tax rate to 33 percent. Remember, states income tax rates are not affected. • Limitations on itemized deductions. • Repeal of the 3.8 percent net investment income tax and continue the current low tax rates for investment income. • Reduction of corporate tax rates. • Taxation of “carried interest” income at ordinary income tax rates. • Elimination of the alternative minimum tax. Estate Planning: wait and see. While it would be unwise to modify an existing estate plan simply to anticipate estate tax changes that may or may not occur, clients who are in the middle of planning (e.g., to make year-end gifts using valuation discounts or for business succession purposes) might want to continue and implement their planning, but with a view toward the possibility of estate tax repeal. Estate planning is not all about taxes. • Defer income and accelerate deductions. Since tax rates would be reduced next year, it would be smart to consider deferring income to be taxed in 2017 at, presumably, lower rates, and accelerate deductions to 2016 to reduce taxable income that would be taxed at higher rates and to take advantage of deductions that might disappear. The same thinking would apply to sales of capital assets: gains should be deferred to next year and losses should be harvested this year. • Make your charitable contributions now. You might want to make larger charitable contributions this year to reduce taxable income that would be taxed at higher rates. If you have pledged to make future contributions, consider honoring those pledges now. • Be prepared to review and possibly rewrite your existing estate plan. Of course, the action you take depends on what tax law changes are ultimately enacted. • Consider making annual exclusion gifts on or before Dec. 31. Each year you can give up to $14,000 in value (e.g., cash, property interests, stock, etc.), or $28,000 in value for gifts by a married couple, to an unlimited number of people. These dollar amounts will remain at $14,000 in 2017. • Consider front-loading a 529 Plan. 529 Plans provide some exceptional income tax planning benefits for those who are putting aside funds for college. • Consider making large lifetime gifts tax-free using your lifetime gift tax exemption. You may want to consider using part or all of your gift tax exemption by making a gift to your family members or others, thereby removing the value of the gifted asset, plus future appreciation, from your estate. Preferably, high basis assets should be gifted. While the possibility of a estate and gift tax repeal exists, there will be no tax cost by using your lifetime exemption (currently $5,450,000 and increasing to $5,490,000 in 2017), and if there is a repeal, you will have simply made additional tax-free gifts. • Review your entire estate plan. While there may be nothing to do now in response to the anticipated tax law changes, it is still a good time to review your existing estate plan to make sure it still expresses your wishes, discuss with your family and your professional advisors (including your tax accountant, financial planner, investment advisors, insurance professionals, and us) whether any non-tax related changes are desired or advisable, and then establish an action plan, which might include taking some action now and deferring some action until the tax laws have changed. Questions for Consideration: 1. Have you nominated the right individuals or organizations to serve as trustee, executor, guardian, conservator, attorney-in fact and/or health care agent? 2. Did you accidentally omit a beneficiary who should be included, or include someone as a beneficiary who should not be included? 3. Have you reviewed all of your beneficiary designations, including life insurance, IRAs, 401(k) plans, other employer-sponsored plans, to make sure they are not out of date and that they are consistent with your wishes and your other estate planning documents? 4. Are your assets properly titled (e.g., assets intended to be held in a Revocable Trust have been formally transferred by deed, change on account name, etc.)? 5. Are your estate planning documents in a safe location and easily accessible to the people named to handle your affairs (e.g., executor, trustee, attorney-in-fact or health care agent)? Have you communicated the location of these documents to these people? 6. Do you have in force adequate life insurance, disability insurance, liability insurance and, perhaps, long-term care insurance? 7. Are there changes within your family (such as births, deaths, aging, health problems, marriages, divorces or a family member’s ability to handle financial matters responsibly)? 8. Have there been changes in your financial situation, including increases or decreases in your income, net worth, liquidity, indebtedness, and major investments? 9. Are you contemplating retirement (or have you retired)? 10. Have you started a new business or sold an existing business?