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It is Best not to Wait to see How Tax Laws Will Change


It is Best Not to Wait to see How Tax Laws Will Change

Some people are waiting to see what changes will be made to estate tax laws now that the new administration is in place. But a recent article in,“Estate planning when tax laws are uncertain,” recommends going forward. The reasoning expressed is sound.

A major part of estate planning can be transferring assets to irrevocable trusts. This offers asset protection, divorce protection and management structure for potential future disability. There’s really no reason to wait for new tax laws to implement planning that can be protective and vital—regardless of the final policies.

You should focus on planning for your future, rather than the ever-changing tax debate in the nation’s capital. For instance, if Trump repeals the generation-skipping transfer tax, you might be prohibited from moving assets outside of the transfer tax system since there may be no tax system from which to shift!

Here are a few ideas to consider:

Flexibility. Use trusts that are flexible in light of the uncertainties and variability in what might happen with tax laws.

Where to locate the trust. Look at “trust-friendly” jurisdictions instead of your home state. For example, consider these four states —Alaska, Delaware, Nevada, and South Dakota. These states have tax and legal environments that are very conducive to trusts. This is important because if there are significant changes in policy, these states may respond quickly with new laws. Other states might be slower to react.

Trust protectors. A protector can be an independent person who’s a fiduciary and is given the authority to remove and replace the trustee, change the situs (where the trust is administered), the governing law of the trust and other powers. This adds additional flexibility to an estate plan.

Determine who will benefit. Unless there is a personal, legal or tax rationale for another route, make your spouse the beneficiary, so you are able to benefit indirectly through your spouse receiving distributions from the trust.

Singles. For singles or those worried about only being able to access trust assets through a spouse, create what is called a Domestic Asset Protection Trust (DAPT). There are 17 states that allow them, so ask your estate planning attorney about them. Florida is not one of the states that allows them. However, I have colleagues that I work with in these other jurisdictions to draft these types of trusts. With this type of trust, the assets are outside of your estate. However, you can still be a beneficiary. If this seems too risky, consider a hybrid DAPT. This gives a person, acting in a non-fiduciary capacity, the authority to add any descendant of your grandparents as a beneficiary.

Grantor Trusts. Most trusts should be created as grantor trusts—meaning that trust income is taxable to the grantor. The most common way to achieve this status is swap power. Under current law, this power can permit the settlor to swap assets from his or her personal name into the trust, in exchange for assets of equivalent value. It can be implemented to take highly appreciated assets out of an irrevocable trust, so they’re included in the settlor’s estate on death.

They can also receive a step-up or increase in income tax basis, which is a benefit when calculating capital gains. If Trump enacts a capital gains on the death tax, this swap power can be used in reverse to swap appreciated assets from a client’s estate, where they’d be subject to a capital gains tax on death, into an irrevocable trust, where they might avoid that gain. This type of flexibility is another reason to plan now.

The changes that may occur are as yet unknown, but waiting for the changes, which will take some time to complete, may be detrimental. In the meantime, it’s best to do the necessary tax and estate planning. Mention this blog and call NOW for an appointment.

Do you live in Miami-Dade, Broward, or Palm Beach counties in Florida? Laws are constantly changing-- has your estate plan been reviewed in the last 2-3 years? Call me (954-888-1747) right away for peace of mind. I can help!

  • My practice is exclusively estate planning and probate,
  • I have prepared numerous estate plans in 16 years of practice,
  • I have administered estates and trusts through Probate all over Florida,
  • I am a Certified Financial Planner Professional™, and
  • I am here for YOU today and there for your FAMILY tomorrow.

Reference: (March 2, 2017)“Estate planning when tax laws are uncertain”

Why would we recommend D.T.F.? Several Reasons: Your ability to explain complex estate problems, clearly and patiently; your total lack of arrogance and pretense; a strong feeling that you are motivated by what you perceive is best for your client, rather than what would generate the largest legal fees; finally, and importantly, you are a lovely guy. A.C.

Two words cannot sum up the entire process of creating my “trust.” I enjoyed your attention to detail, your patience of explaining terms and conditions until I understood, also giving me copies to read and understand. Thank you for your suggestions on what was best for “me” but still allowing me to make my choice. Most of all, thank you for thinking of “me.” Wells Fargo said “you were the best” I cannot deny that. Again thank you very much for everything. Anna is an asset or a compliment to the firm. She is warm and very caring. It was great doing business. Thank you.