Goodbye 2016, Hello 2017 Trust + Estates

Goodbye 2016, Hello 2017 Trust + Estates

Discounting of Ownership Interests:  Summer of 2016 brought proposed federal regulations that would prohibit the use of discounts to the value of interests in family-controlled entities commonly used to transfer wealth from one generation to the next tax efficiently.  Prior to the election, it was anticipated that the proposed regulations would be finalized and effective in January of 2017.  In early December the planned hearing on the proposed regulations occurred and due to the significant number of comments received, and, probably the change in politics, the adoption of the proposed regulations has been delayed.  It is possible that the proposed regulations will go by the wayside.  For now, discount valuations in family-controlled entities may continue.

Federal Tax Reform:  It is anticipated that new tax legislation will be proposed in early 2017.  Federal estate tax repeal is sure to be considered as well as changing the existing rules which provide for a “step-up” income tax basis on death.  The “step-up” income tax basis increases the size of the gross estate in determining whether federal estate is due, but it also allows for a post-death sale with little or no capital gain to be realized.  The President-Elect’s plan proposes to subject the unrealized gains to tax above a certain threshold.  With a plan of no federal estate tax but a modified “step-up” in income tax basis, the bottom line is there will still be tax due on a larger estate at death.

It is also possible, based upon the proposed plan of the President-Elect, that certain charitable deductions above an income level of $200,000 for a married couple, and $100,000 for a single taxpayer, will be reduced.  Therefore, if you are considering charitable contributions in 2017, accelerate them to before year end 2016 to be certain of obtaining your deduction under the current rules.

Under the current law, the federal estate, gift and generation skipping transfer tax exclusion amount for 2017 will be $5,490,000 per individual.  This means that a married couple during life and/or death may transfer up to $10,980,000 free of estate and gift tax.  The gift tax annual exclusion will remain at $14,000 per donee ($28,000 per couple, per donee).

While death and taxes are certain, so is change.  And any change that takes place under the new administration, will, as history has consistently shown us, be subject to change again. We need to remain nimble and flexible with our estate plans which means a frequent review of distribution plans, named fiduciaries, assets, and of course, the current laws.


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