How to Plan for the Possible Repeal of the Estate Tax

The White House appears committed to tax reform, but currently, the details of the reform are being negotiated and are subject to potentially dramatic changes. With the estate tax slated for the chopping block, owners of large estates are left with uncertainty about what the estate tax might look like next year, or whether it will exist at all. Estate planning under such circumstances is difficult but can be accomplished with foresight and thoroughness, under the direction of a skilled Los Angeles asset protection attorney.


What Implications Does The Possible Estate Tax Repeal Have On Estate Planning?

All of the current tax reform proposals include a repeal of the estate tax or “death tax.”  On the other hand, the major proposals do NOT include a repeal of the gift tax, although the GST (goods and services tax) is included in the most recent GOP proposal for repeal. Additionally, asset protection attorneys throughout Los Angeles have speculated that any estate tax repeal will inevitably be temporary.

What that means for estate owners is a complicated balancing of current tax liabilities, potential future tax liabilities, and non-tax interests such as asset protection and probate avoidance. Many tried-and-true wealth management techniques (such as GRATs and intentionally defective grantor trusts) will still be useful for the near future, and possibly again if the estate tax is repealed and then reinstated. And because the gift tax will almost certainly remain, gifts from the estate should be planned to be made up to the current exemption. But with so much uncertainty involved, estate plans should be made to include as much flexibility as possible to address changing circumstances.

 

How Can Flexibility Be Maintained?

The current administration’s recent efforts surrounding the repeal of the Affordable Care Act have revealed Congress to have a degree of difficulty passing proposed reforms that is matched by the administration’s persistence in pressing for those reforms. In such a climate, maximizing flexibility in estate planning is critical. One easy strategy for maintaining flexibility is simply delaying taking actions until deadlines approach; for example, holding off on making taxable gifts will allow estate owners time to see what happens in Washington. Additionally, estate owners should consider tools such as irrevocable trusts with trust protectors who can adapt directives to trustees as political changes occur.

Repealing the estate tax could be a great boon to wealthy estates, but getting there will necessarily involve some turbulence. With proper planning, however, those estates can successfully emerge on the other side strengthened and streamlined for a new day. Los Angeles asset protection attorney Jacob Stein has spent years assisting high-net-worth clients manage their estates through political and financial changes.  If you have questions about the pending repeal of the estate tax and would like to speak with an asset protection attorney in Los Angeles, call Maximum Asset Protection today at 818-465-2123 to arrange a consultation.