Estate and Tax Planning Roadmap for 2019-2020

Steve Leimberg’s Estate Planning Email Newsletter – Archive Message #2745
Date: 03-Sep-19
From: Steve Leimberg’s Estate Planning Newsletter
Subject:
Estate and Tax Planning Roadmap for 2019-2020: Martin M. Shenkman,
Jonathan G. Blattmachr, Joy Matak, & Sandra D. Glazier

“Tax reform at the end of 2017 (the “2017 Act”) changed the planning landscape. While
many clients and even practitioners see little need for estate tax minimization planning
in light of the high exemptions, others see an opportunity to shift wealth, implement
asset protection strategies utilizing the higher exemptions, and so forth. There was also
a marked shift in planning discussions from estate tax to income tax, although it is less
clear as to how much actual planning, utilizing non-grantor trusts for an array of income
tax planning benefits has occurred.

The changes to planning were, in some instances profound, with practitioners having to
craft completed gift trusts that were able to secure the benefits of the high temporary
exemption, non-grantor status for state and local tax (“SALT”) or other benefits, while
still preserving access to the trust assets given the size of the exemption relative to the
net worth of even wealthy clients. These seemingly contradictory goals required
rethinking many aspects of trust planning and drafting. In addition to the use of nongrantor
trusts described above, it has become common to change what had been the
traditional “A-B” trust dispositive scheme to a plan bequeathing assets to a marital trust
that could be disclaimed, or transferred via a Clayton election, to a credit shelter
disposition, to facilitate the possibility of obtaining a second basis step-up on the death
of the surviving spouse. Some have added clauses to credit shelter trusts to enhance
the flexibility to shift assets back into the estate to obtain a basis step-up. The use of
general powers of appointment to cause trust assets to be included in the client’s
estate, or the estate of an older generation family member whose estate is less than the
exemption (so-called “upstream” planning), has also become common.

With a possible shift of control in Washington on the horizon, various demographic
trends, and increasing elder financial abuse, the challenges have become ever more
complex. This article will explore various planning strategies that practitioners may
employ to help clients capitalize on the estate tax environment created by the 2017 tax
act, with consideration of these newer developments and trends.

In this world of constant uncertainty, only one thing is clear, planners need a roadmap in
order to be successful in crafting strategies to preserve and protect their clients’ wealth.
What follows is a discussion of a wide range of planning considerations in this
challenging planning environment. Some of the planning points in this article have been
adapted from several prior LISI newsletter and other articles and presentations.”

To read the full commentary click here.