As Congress and President Trump work on promised tax reform, keep the focus on your long-term financial goals. Before the end of the year, consider taking advantage of deductions that may not be available to you in future years, and make sure you have made your annual exclusion gifts for 2017. In addition, you should review and update your estate plan to make sure your family is protected and your documents accomplish your estate planning objectives.

Tax Cuts and Jobs Act

The Tax Cuts and Jobs Act, as proposed, would double the estate, gift and generation-skipping transfer (“GST”) tax exemptions to $11,200,000 as of January 1, 2018, and would eliminate the estate tax and GST tax entirely as of 2024. If the Act as proposed is enacted, in 2024 the gift tax would remain, but the tax rate would fall from 40% to 35%. In addition, under the proposed Act, at death assets would continue to get a step up in basis for income taxes.

  • Consider paying your estimated state income taxes in December, instead of January, in case the state tax deduction is eliminated for the 2018 tax year.
  • With the proposed higher standard deduction, 2017 charitable donations may be more tax-efficient than charitable donations in future years. For maximum income tax benefit, consider accelerating planned charitable gifts or making gifts to a donor advised fund by the end of the year.
  • The property tax deduction may be capped at $10,000; paying property taxes due in 2018 in December 2017 may allow you to maximize your deductions. 

Estate Plan

Your estate plan should protect your family’s assets regardless of any changes to the tax laws. Make sure your estate plan still makes sense as your children have grown older, your grandchildren have been born, your relationships have changed and your assets have appreciated. 

Beneficiary Designations and Titling

Your Will, including any Revocable Trusts, are only part of your estate plan – make sure your beneficiary designations and the titling of your assets are current and coordinated with your overall plan. In some cases, these documents will have a greater effect on the disposition of your assets than your Will and Trusts.

Annual Exclusion Gifts 

If you have not made your 2017 annual exclusion gifts (gifts that can be made without using any of your lifetime gift tax exemption), do not delay! The 2017 annual gift tax exclusion amount is $14,000 per donee ($28,000 per donee for married couples). The 2018 annual gift tax exclusion amount will be $15,000 per donee ($30,000 per donee for married couples). The earlier you make these gifts, the earlier the recipients benefit from the gifts and the future appreciation. To qualify, annual exclusion gifts must be made (and checks cashed) by December 31st. Avoid the year-end rush – this is a “use it or lose it” opportunity!

Larger Gifts

Under current law, the 2017 gift tax and GST tax exemption amounts are each $5,490,000; these exemptions are increasing to $5,600,000 as of January 1, 2018. Consider wealth transfer planning that takes advantage of the current low interest rates to transfer assets – especially assets that are likely to appreciate – to lower generations with little or no gift tax. Start planning now so that we can work with you to implement the right plan for your family.

Valuation Discounts

The IRS has formally withdrawn the proposed regulations under §2704 of the Internal Revenue Code. In the short-term, it seems unlikely that the IRS will try to reduce valuation discounts on intra-family transfers of interests in family businesses.