While there are many ways that the 2017 Tax Act impacts businesses, business owners and high net worth individuals may also be affected individually as a result of the changes. Although the income tax changes under the 2017 Tax Act are more extensive, here are some common ways that the 2017 Tax Act may impact a wealth and succession plan:
- If your individual net worth is in excess of approximately $11.2 million (less prior gifts using lifetime exemption) or your combined net worth together with your spouse is in excess of approximately $22.4 million (less prior gifts using lifetime exemption), then you may want to consider whether additional gifting would be appropriate. Under the 2017 Tax Act, the doubled federal exemption will only be available until December 31, 2025, and it may terminate earlier if Congress shifts to a Democratic majority before that date. Accordingly, making a current gift may be the only way to ensure utilization of this exemption.
- Conversely, if your net worth is below these thresholds, you may want to consider simplifying your dispositive plan to eliminate trusts that were primarily being used to minimize taxes.
- If your Will or Revocable Trust provides for a distribution of the estate and/or GST (Generation-Skipping Transfer) exemption amount to someone other than your spouse or a trust for the benefit of your spouse, then you may want to consider whether that distribution should be capped.
- If you have permanent life insurance that is in excess of the amount of liquidity likely to be needed for estate and inheritance taxes anticipated in light of your actuarial life expectancy, and the policies are not paid in full, then you may want to consider a viatical settlement of the policies.
These are just some examples of how your wealth and succession plan may need to be changed. There is no one-size-fits-all approach to revising your plan in response to tax reform. Every plan should be reviewed to determine the best strategy.