Estate Planning

Seeking a better than an outdated Estate Planning solution?

The Tax Cuts & Jobs Act of 2017 – most of which went into effect on Jan. 1, 2018 – enacted some of the most sweeping reforms, in decades, of USA’s federal tax policy.


  • Doubling the unified federal estate, gift, and generational-skipping transfer (GST) taxes exemption – from $5 million to $10 million base, then indexed for inflation. For 2018: the amount now is $11.18 million per individual (up from previously set $5.49 million), and $22.36 million per married couple (up from previously set $11.38 million). This is a “use it or lose it” opportunity because these increased exemptions are scheduled to “sunset” in 2026 to the previous lower level (unless the “sunset” is eliminated, as previously happened in 2012) – and is subject to change if the political balance of power shifts before. Portability (the act of “porting” any unused exemption amount to the surviving spouse) remains unchanged, presuming the decedent’s executor makes the proper election on an estate tax return. 
  • Limiting allowable amount for State and Local sales and property tax deductions (“SALT deductions”) to $10,000. A pain for residents of high income and property tax states (e.g., CA, CT, MA, MD, NJ, NY, OR, VA). 
  • Providing a new tax break for qualified business income (QBI), such as profits from qualified sole proprietorships, farming, pass-through partnerships or S-corporations, and even trusts with income below a specified threshold.

Today, a better Estate Planning solution calls for more than just reducing or eliminating taxes:

For example, though an “all to the other” approach with a portability election may seem like the right thing to do for married couples with valuable interests in a privately-held business, following are a few possible scenarios when another approach is better: 

  • Blended family/other intended beneficiaries: a QTIP/bypass trust helps ensure children of the first- to-die are remainder beneficiaries at the second death because the survivor cannot change beneficiaries. Same with other family members, friends, charities chosen by the first-to-die. 
  • Creditors: a QTIP/bypass trust keeps creditors (especially those of the survivor) from reaching these assets because the survivor cannot change the terms of the pre-set trust.
  • Highest appreciation potential: Sometimes, removing all the assets and all future appreciation out of the estate of the second-to-die produces the best results – in which case a QTIP/bypass trust is a better solution than an “all to the other” election. 
  • Clawback: A QTIP/bypass trust prevents the IRS from trying to clawback the unused portion of the first-to-die’s exemption amount following the death of the second spouse.

So, how to better remake an Estate Planning recipe to more smartly leverage today’s changed
opportunities and reality?

Remake your Estate Planning recipe, part 1: 

Yes, there are common ingredients for every comprehensive Estate Planning recipe: Wills, Trusts, Powers of Attorney, Medical Directives, Beneficiary Designations. 

However, your Estate Planning recipe should be thoroughly reviewed and remade (if necessary) to better serve your unique situation within the current overall changed reality. That’s the difference we bring to your table. As an independent, non-captive, fee-based wealth management services firm: we’re free to pinpoint your unique needs and wants (without some ulterior commission-sales motive in mind), pick ingredients uniquely right for you, and custom-prepare recipes which better serve your unique business and personal requirements – and not just dish out servings of same-old ‘choices.’

Remake your Estate Planning recipe, part 2:

For example, let’s look at suggested broad-stroke best practices for Estate Planning:

  • Rework outdated Wills: Is a simplistic 30-year old six-page Will adequate – especially given the recent doubling of the unified federal estate, gift, and generational-skipping transfer (GST) taxes exemption amount?
  • Recalculate old Formulas: Is a 15-year old revocable credit shelter trust, originally set for the benefit of children from a prior marriage when the exemption limit was $1 million, adequate for equitably providing for a current spouse today and going forward
  • Recalibrate old Trusts: Is a 15-year old irrevocable life insurance trust, originally set to pay for estate tax when the limit was $1 million, adequate today and going forward?
  • Revisit Powers of Attorney: Are the provisions granted 5-years ago, allowing agents the right to make gifts from the tax-exempt part of the estate, still smart given current doubled limits (before“sunset” terms are re-applied in 2026, or possibly not) or just dangerous spigots for potential elder financial abuse?

These broad-stroke best practices guidelines should still be considered but only acted on after thorough review of each unique situation and current goals.

Remake your Estate Planning recipe, part 3:

Another example is a list of broad-stroke Estate Planning tactics typically used by high net worth individuals & families. However, these tactics each need to be peeled apart and examined as composite parts before re-bundling them to better serve your unique situation within the current overall changed reality:

Tactic Method of Action:
Shifting Income Gift high-income producing assets to a trust which distributes taxable income to a beneficiary in a lower tax bracket.
Charitable Giving Recover losses of previous line-item deductions used but now constrained (e.g., annual “SALT deduction” now limited to $10,000) by contributing more to charity, since the recent Tax Cuts & Jobs Act increased the charitable contribution limit up to 60% of adjusted gross income.
Delaying Capital Gains Taxation Gift appreciated assets that are to be sold to a Charitable Remainder Trust (a tax-exempt trust), thereby avoiding immediate capital gains taxation, and have 100% of the proceeds reinvested. Annual distributions from the CRT will be taxed to the beneficiary but may avoid income taxation at top rates.
Selling instead of Gifting Use installment sales to defective grantor trusts and zeroed-out Grantor Retained Annuity Trusts, preserving the gift tax exemption amount for use against assets in the decedent’s estate while still reducing the taxable estate.
Leveraging Basis Step-Up Include low-basis assets in a decedent’s non-taxable estate, receiving a step-up in basis and reducing capital gains tax at a subsequent sale.
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  • Wills
  • Trusts including Insurance
  • Powers of Attorney
  • Medical Directives
  • Beneficiary Designations

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