News, Events & Blog
by Heidi Isenhart | Jul 22, 2019 | Blog, Estate Planning & Probate |
In 2018, Florida revised the ability to more easily modify existing trusts. Basically, now there are three separate ways that a trustee may engage in a decanting, a general term used to describe the trustee of an existing trust creating a new, second trust, and moving all assets of the old trust into the new trust.
1. A trustee may decant if they are given “absolute power” over distributions in the trust instrument. This method of decanting provides the most flexibility for all parties.
2. A trustee without “absolute power,” such as a distribution power limited by the ubiquitous health, education, maintenance and support, or “HEMs,” standard may decant. This method must comply with a more rigid standard.
3. A trustee may decant from any trust that does not qualify as a “supplemental needs trust” to a trust that does qualify as such. There are important limitations for this type of decanting as well.
You can read more about the ways a trustee may decant a trust in our other article: Decanting Trusts In Florida.
New statutes in Florida for special needs trusts
The new statute provides that a trustee who has the power “to invade the principal of the first trust to make current distributions to or for the benefit of a beneficiary with a disability may instead exercise such power by appointing all or part of the principal of the first trust in favor of a trustee of a second trust that is a supplemental needs trust.” A “beneficiary with a disability” is defined as “a beneficiary of the first trust who the authorized trustee believes may qualify for government benefits based on disability, regardless of whether the beneficiary currently receives those benefits or has been adjudicated incapacitated.” A “supplemental needs trust” is defined as “a trust that the authorized trustee believes would not be considered a resource for purposes of determining whether the beneficiary who has a disability is eligible for government benefits.” That provides a great deal of flexibility in the trustee being able to create a second trust that qualifies as a supplemental needs trust, however, there are requirements specific to this type of decanting.
There are many situations where decanting to create a supplemental needs trust will be desirable. For example, what if mom and dad create a trust that is irrevocable after their death and this trust benefits their three children? The trust lasts for the life of the beneficiaries and allows the trustee to distribute from income or principal to the beneficiaries for their health, education, maintenance, and support.
If after the death of their parents, one of the children is involved in an accident or suffers a brain injury with permanent damage, then the terms of the trust will no longer be the best structure. Through decanting, an authorized trustee could create a second trust that is a supplemental needs trust for the benefit of the child with the disability and move one-third of the first trust’s assets to it through decanting. Another second trust could be created for only the other two children who have no disability (with all other terms being the same as the first trust) and two-thirds of the first trust’s assets moved to it through decanting. After the decantings, the disabled beneficiary may qualify for government benefits because the first trust would have been “counted” as a resource while the second trust will not. Additionally, the beneficial interests of the other children in their new trust are substantially the same as before the decantings occurred.
Questions to consider before decanting a special needs trust in Florida
When considering decanting in the context of special needs trusts, ask these initial questions:
- Is there a compelling reason to decant? (Will the exercise of the power further the purposes of the trust?) Perhaps the existing trust terms will prevent a beneficiary with a disability from qualifying for government benefits.
- Is the trustee an authorized trustee (not a settlor or beneficiary)?
- Does the trustee have the power to invade the principal of the trust?
- Is the beneficiary under a legal disability or does the trustee reasonably believe the beneficiary is incapacitated?
- Is the proposed supplemental needs trust one that the trustee believes would not be considered a resource for purposes of determining whether the beneficiary who has a disability is eligible for government benefits?
- Does the supplemental needs trust benefit the beneficiary with a disability?
- Is the second trust’s beneficial interest substantially similar to the beneficiary’s interest under the first trust? In other words, you cannot substantially change the interests of any beneficiary; the only exception being that the interests of the beneficiary with the disability need only qualify as a supplemental needs trust would normally provide and likely their interests will be changed very substantial in order to qualify.
- Are the beneficiaries of the second trust also beneficiaries of the first trust? In other words, you cannot add new beneficiaries.
If you have answered yes to any of the above questions and are interested in learning more about the expanded opportunities for fixing your special needs trust, please feel free to contact us.
by Daniel Harris | Jul 22, 2019 | Blog, Estate Planning & Probate |
Is that irrevocable trust you created, or somebody created for your benefit, really set in stone? Prior to 2007, the answer would mostly be yes, but between 2007 and now, the answer became more complex. Modifications without going to court are now more easily done, with certain limitations. One of the easiest methods of modifying an irrevocable trust is to use a doctrine called decanting. Decanting is a general term used to describe the trustee of an existing trust creating a new trust (also referred to as the “second trust”) and moving all assets of the old trust into the new trust. The result is that the old trust is terminated, and the new trust provisions govern use of the trust property.
A trustee may have various reasons to decant. It may be to convert a trust to a supplemental needs trust, to correct drafting mistakes, to make needed clarifications, or to adapt to changes in circumstances or in the law. Decanting can transform an irrevocable trust without the need for judicial modification. The catch with decanting, has always been that under prior Florida law, very few trusts contained the appropriate powers to allow a trustee to decant.
Florida has allowed decanting since 1940, but it was limited to a trustee who has the “absolute power” to invade the principal of the trust. In other words, if the trustee has sole and absolute discretion regarding their distribution power over the principal of a trust and that discretion was not tied to any ascertainable standard (i.e. health, education, maintenance and support of the beneficiary), then that trustee has “absolute power.” Due to that limited framework, and changes in estate planning practice over the years, the number of trusts for which decanting was even possible was quite small.
The 2018 Florida decanting statute revision
However, in 2018, Florida revised the decanting statute in many significant ways. Now, there are three separate ways that a trustee may engage in a decanting:
- A trustee may still decant if they are given “absolute power” in the trust instrument. This method of decanting provides the most flexibility for all parties.
- A trustee without “absolute power” may decant; such as a distribution power limited by the ubiquitous health, education, maintenance and support, or “HEMs,” standard. In this scenario, the trustee’s ability to have different provisions in the new trust will be limited, as discussed below.
- A trustee may decant from a trust that does not qualify as a “supplemental needs trust” to a trust that does qualify as such. There are important limitations for this type of decanting as well.
One very important concept for clients and attorneys to discuss is whether the client would be opposed to a future trustee engaging in decanting. Decanting is now a default power of all trustees. If the client does not want changes made to their plan in the future, then the drafting attorney may include a broad prohibition against decanting to effectively prevent the trustee from being able to effectuate that type of transaction.
In order to exercise the decanting power, the trustee must be an “authorized trustee.” Generally, that will be a trustee who is not the grantor of the trust or who is not also a beneficiary of the trust. If decanting is something that the grantor would like available as an option to deal with the unknown future, but they will only be naming trustees who are also beneficiaries, then a power should be included to allow that trustee to appoint a special co-trustee to exercise the decanting power granted in the trust (or by Florida statute).
What are the different types of decanting?
If a trustee may distribute trust property in any amount and at any time in that trustee’s sole discretion, then they have “absolute power.” While there are limits on how the second trust may differ, the trustee has the broadest authority in this situation. They may divide up interests of multiple beneficiaries, add additional guidance on trust distributions, change trustee succession, and more. Thus, the trustee can change substantive and administrative provisions.
If a trustee does not have “absolute power” because, for instance, they may distribute only for a beneficiary’s health, education, maintenance and support, then the changes in the second trust are much more limited. The changes in this situation are more likely to be limited to administrative issues, i.e. trust succession, investment powers, etc.
A trustee who has the power “to invade the principal of the first trust to make current distributions to or for the benefit of a beneficiary with a disability may instead exercise such power by appointing all or part of the principal of the first trust in favor of a trustee of a second trust that is a supplemental needs trust.” That provides a great deal of flexibility in the trustee being able to create a second trust that qualifies as a supplemental needs trust (also called a “special needs trust”). However, there are requirements specific to this type of decanting which you can learn more about in another article we wrote: How to Decant to a Special Needs Trust.
It is important to note, the exercise of the decanting power may not: (i) increase the authorized trustee’s compensation beyond the compensation specified in the first trust instrument or (ii) relieve the authorized trustee from liability for breach of trust or provide for indemnification of the authorized trustee for any liability or claim to a greater extent than the first trust instrument. However, the exercise of the power may divide and reallocate fiduciary powers among fiduciaries and relieve a fiduciary from liability for an act or failure to act of another fiduciary as otherwise allowed under law or common law.
Also, there are many other important tax considerations when it comes to decanting and it is important to ensure you are receiving the appropriate level of advice for this sophisticated area of trust and tax law. First, the topic of decanting is on the “no rule” list for the IRS. This means that it is not possible to request a private letter ruling and receive the IRS’s stamp of approval before engaging in a decanting. Further, there are many tax traps for the unwary and each situation is unique, requiring special attention to tax issues.
Considerations before decanting in Florida
- The “absolute power” requirement in the prior statute is no longer a strict absolute requirement. Even if the trustee’s powers to invade principal are limited to an ascertainable standard, the power to decant can still exist.
- Although the new statute requires that a beneficiary be disabled to decant into a supplemental needs trust, decanting does not depend upon whether the beneficiary is currently eligible for government benefits or has been adjudicated incapacitated. Rather, a trustee must believe that the beneficiary may qualify for governmental benefits based on his/her disability or the trustee reasonably believes the beneficiary is incapacitated.
- While decanting rules have expanded, the notification rules have become stricter. There is a 60-day written notice requirement and the statute carefully outlines who must be notified of a trustee’s intent to decant and what documentation must be sent and received to satisfy its requirements. It does allow for a written waiver of the notice period to shorten the time frame to allow the trustee to act immediately. It is important to note that the 60-day notice require does not limit the right of any beneficiary to object.
In conclusion, Florida has greatly expanded the opportunities for a trustee to decant a problem trust. The decanting process should include the trustee consulting with competent legal and tax advisors as well as the beneficiaries and interested parties to ensure the outcome is beneficial to all parties and complies with the law. If you are a trustee of beneficiary and would like to know more about your options with decanting, please feel free to contact us.
by Nicole Copsidas | Jun 6, 2019 | Blog, Estate Planning & Probate, Fiduciary Litigation |
ShuffieldLowman partner, Alex Douglas, also contributed to this post.
Once a trustee accepts trusteeship of a trust, there are certain fiduciary duties to the trust beneficiaries, according to the Florida Trust Code. Some of these fiduciary duties cannot be modified, regardless of how the trust is written.
What does it mean to accept a trusteeship? A written document expressly acknowledging his acceptance is the most obvious example. However, trustees should understand that acceptance of trusteeship can occur in other ways too. This means a trustee is “on the hook” to comply with his fiduciary duties if he accepts trusteeship by substantially complying with a method of acceptance provided in the terms of the trust, or if the trust does not provide a method for acceptance of trusteeship, if he accepts delivery of trust property, exercises powers or performs duties as a trustee, or otherwise indicates acceptance of trusteeship.
Once a trustee has begun acting as a trustee, he has a mandatory duty to administer the trust in good faith and in accordance with the terms and purposes of the trust, and in the interests of the beneficiaries. The Florida legislature made a recent change to the definition of “interests of beneficiaries” to make it clear that the settlor’s wishes, as expressed in the trust, should be considered. This means that beneficiaries generally cannot circumvent a settlor’s wishes by claiming that their interest is best served some other way. For example, if a settlor expressed in the trust that he only wants a beneficiary to receive lump sum distributions at certain lifetime milestones (e.g., graduating from college, getting married, etc.), the beneficiary cannot alternatively demand trust distributions on a monthly basis.
Similarly, a trustee’s mandatory duty of loyalty requires him to administer the trust solely in the “interests of the beneficiaries,” and to avoid conflicts and self-dealing. Actions by a trustee involving a conflict of interest that are not specifically authorized by the trust or the Florida Trust Code, or otherwise approved by the Court, are voidable and may subject a trustee to liability to the trust beneficiaries.
Another fiduciary duty owed by a trustee is the duty of impartiality. This does not necessarily mean that all beneficiaries should be treated equally. Rather, the trustee should consider the facts and circumstances of each request or action, as well as the terms in the trust, when deciding the best way to proceed. A trustee should not favor one beneficiary over another in conflicts that are merely between beneficiaries and do not relate to the validity of the trust. In the case of Barnett v. Barnett, 340 So. 2d 548, 550 (Fla. 1st DCA 1976), a trustee’s litigation fees were denied because the trustee took a partisan stance and argued the side of one or more of the claimants.
In the event someone contests the validity of the trust, the trustee has an obligation to defend the trusts’ validity surprisingly, while there is no statute. A trustee also has a duty to keep clear, distinct, and accurate records. As part of this duty, a trustee should also make sure that he is keeping trust property separate from his own property. If inadequate recordkeeping results in any obscurities or doubts, all presumptions are against the trustee. It is important for trustees to document each decision made and why the decision was made.
Trustees
should also consider making and keeping records simultaneously with the actions
taken to avoid any doubt concerning accuracy. If a trustee is seeking
compensation, he or she must keep accurate time records. If the trust does not
specify how the trustee should be compensated, the trustee is entitled to
compensation that is reasonable under the circumstances. The burden will be on
the trustee to show the reasonableness of his or her fees.
If
there is a lack of documentation, there is a presumption of impropriety against
the fiduciary. Even saying that a hurricane blew away your records is not an
excuse! Really! In Traub v. Traub, the Court held that, because the trustee failed to keep
accurate records, even though the records were allegedly destroyed, the burden
shifted to the trustee to show that the trust money expended was proper.
Next, a trustee has a duty to keep beneficiaries informed regarding the administration of the trust and to provide accountings. Initially, a trustee must notify qualified beneficiaries of the existence of the trust, identify himself as the trustee, and explain the beneficiaries’ right to receive trust accountings. Other mandatory duties of the trustee are to provide a complete copy of the trust and to account to qualified beneficiaries by providing a trust accounting at least once annually. Additionally, if a qualified beneficiary of an irrevocable trust requests relevant information about the assets, liabilities, or particulars relating to the trust administration, a trustee has a mandatory fiduciary obligation to provide the requested information. However, as long as a trust is revocable, the trustee’s duty is only owed to the settlor (the person who made the trust) of the trust.
Another important fiduciary duty is the duty of prudent administration. There is no “winging it” when it comes to trust administration. A trustee must administer the trust as a prudent person would, by considering the purposes, terms, distributions, requirements, and other circumstances of the trust. Trustees must exercise “reasonable care, skill, and caution.” If a trustee is unsure whether certain action (or inaction) is the best choice, he should investigate and seek all information necessary to make an informed decision. This is good advice even if all beneficiaries consent to the action or inaction– trustees still need to make sure their discretionary actions make sense and are in the best interest of the beneficiaries as defined by the trust.
During the course of prudent administration of the trust, the trustee should only incur reasonable expenses. A trustee should consider what is reasonable for him to do on his own, versus what is better for a professional to do. If a trustee is hiring an outside vendor to perform a task (e.g., accountants, attorneys, etc.), he should negotiate a reasonable fee for the work needed. If a trustee has his own set of special skills, he will be expected to use that set of skills. A corporate fiduciary will be held to a higher standard than an individual. Fair compensation should be based upon the trustee’s particular skills.
When it comes to hiring third parties, a trustee must choose wisely. He should investigate the background of all professionals and agents hired, including attorneys, accountants, investment advisors or other agents. Generally, a trustee may act on the recommendations of such persons without independent investigations.
Finally, when it comes to claims of creditors, a trustee has a mandatory obligation to file a notice of trust upon the settlor’s death. A trustee must also pay expenses and obligations of the settlor’s estate, in the event the assets of the settlor’s estate are not sufficient to satisfy valid creditors’ claims.
Navigating this process can get complicated, so should you have any questions regarding the duties of a trustee, feel free to contact one of our highly-qualified and experienced trust attorneys.
Learn about protecting yourself as a trustee in our other blog post: How to Protect Yourself as a Trustee.
by Alexander Douglas | Jun 6, 2019 | Blog, Estate Planning & Probate, Fiduciary Litigation |
ShuffieldLowman attorney, Nicole Copsidas, also contributed to this post.
In the event that a problem develops in the trust administration of an irrevocable trust (a trust that cannot be amended by the person who created the trust), or if there is an ambiguity in the trust document itself, or there are allegations by the beneficiaries that the trustee is not serving the interest of the beneficiaries, the first safe harbor to consider is a non-judicial settlement agreement. This is an agreement that is signed by the trustee and the beneficiaries that have a present income or beneficial interest in the trust, and from the beneficiaries that get the rest of the trust (i.e. the “residual” or “remainder” beneficiaries) when the persons who have the present income or beneficial interest die (these persons are also called the “qualified beneficiaries” under the trust code). You may not use a non-judicial settlement agreement to produce a result not authorized by other provisions of Florida’s Trust Code, or that could not be properly approved by the court. These types of agreements may cover:
- The interpretation or construction of the terms of the trust;
- The approval of a trustee’s report or accounting;
- The direction to a trustee to perform, or refrain from performing, a particular act; or
- The liability of a trustee for an action relating to the trust.
Another
safe harbor is to obtain the consent and release from all of the qualified
beneficiaries. When obtaining a consent and release from the qualified
beneficiaries, the trustee should give full disclosure of the relevant
facts. Alternatively, a trustee may ask the court to provide the trustee
direction which is also called “declaratory relief” or “declaratory action”.
Any interested person can invoke the court’s jurisdiction to obtain declaratory
relief, and the proceeding can relate to construction, validity,
administration, or distributions of trust. A declaratory action can also
be utilized to have the court review a trustee’s fees, review and settle
interim trust accountings or final trust accountings, determine any right or
duty of the trustee, seek instruction by the trustee, or determine any other
matters involving trustees or beneficiaries.
For instance, let’s say a family relative dies and leaves a trust for you and
your siblings so you can pursue a “college or higher education degree” and the
bank is the trustee. Let’s also assume that your child wants to go to a
technical school to become a mechanic and wants the trust to pay for this
education. The trustee may raise a concern that the technical school will not
result in a “college degree” and therefore could file an action with the court
to ask the court to interpret the trust or permit the trustee to use trust
funds to pay for the technical training. The trustee alternatively could obtain
the written consent of all of the trust’s qualified beneficiaries (assuming
they are of age or have their parent’s consent) to use the trust funds to pay
for the technical training.
Finally, a
trustee who is considering exercising a discretionary power may seek judicial
approval before acting if there is concern that a beneficiary may object. In
such circumstances, the trustee should file a petition that describes the
proposed exercise or non-exercise of the discretionary power and sets forth
sufficient information to inform the qualified beneficiaries of the reasons for
the proposal, the facts upon which the trustee relies, and explains how other
beneficiaries will be affected. The burden is then on the objecting beneficiary
to show why the proposed exercise or non-exercise of the power by the trustee
is an abuse of the trustee’s discretion.
For
example, if a trustee is allowed to distribute trust funds in any amount that
the trustee deems just and proper for the benefit of three beneficiaries, and
one beneficiary has a greater financial need because of a disability than the
other two, the trustee before making the distribution can seek judicial
approval to favor the beneficiary that has more financial needs over the
other two beneficiaries. Otherwise, without court approval or consent of the
beneficiary, the trustee could be exposed to allegations that the trustee
inappropriately favored one beneficiary over another and otherwise that the
trustee breached his or her duty of good faith.
The facts and circumstances governing trust administrations differ on a case-by-case basis. ShuffieldLowman has an experienced team of trust attorneys that can guide trustees through the trust administration process to ensure they are complying with their mandatory fiduciary duties. Our attorneys can also assist trust beneficiaries with understanding their rights and recognizing breaches of fiduciary duty by a trustee who has veered off course.
Learn more about the duties of a trustee in our blog post: Understanding the Fiduciary Duties of a Trustee.
by ShuffieldLowman | Apr 24, 2019 | Estate Planning & Probate, News |
ORLANDO, FLORIDA – ShuffieldLowman recently announced that attorney Julie Ickes has joined the firm, working in the Orlando office. A former business owner and judicial clerk for both the U.S. Bankruptcy Court and the U.S. District Court, Ickes brings these experiences and an advanced law degree in taxation to her practice in the areas of estate planning, trusts and estates.
Ickes is a graduate of Smith College, with a B.A., in Economics and French Studies and University of Florida Levin College of Law where she earned her J.D., cum laude, and LL.M. in Taxation. While in law school she served as the Executive Research Editor of the Journal of Technology Law & Policy and the Research Editor of the Florida Journal of International Law. In addition, she also attended the Duke-Geneva Institute in Transnational Law in Geneva, Switzerland where the late Supreme Court Justice Antonin Scalia was an instructor.
She is conversational in French and German, is a member of The Florida Bar’s Real Property, Probate and Trust Law Section, the Tax Law and the Elder Law Sections and is active in the Florida Association of Women Lawyers, where she held a leadership role in the St. Johns County chapter.
ShuffieldLowman’s four offices are located in Orlando, Tavares, DeLand and Port Orange. The firm is a 40 attorney, full service, business law firm, practicing in the areas of corporate law, estate planning, real estate and litigation. Specific areas include, tax law, securities, mergers and acquisitions, intellectual property, estate planning and probate, planning for families with closely held businesses, guardianship and elder law, tax controversy – Federal and State, non-profit organization law, banking and finance, land use and government law, commercial and civil litigation, fiduciary litigation, construction law, association law, bankruptcy and creditors’ rights, labor and employment, and mediation.
by Daniel Harris | Apr 19, 2018 | Blog, Estate Planning & Probate, Tax Advice & Controversy |
Congress recently passed the Tax Cut and Jobs Act (“TCJA”) earlier this year, the largest revision to the tax code in thirty (30) years. Among the many changes are significant increases in the Estate, Gift, and Generation-Skipping Transfer (GST) tax exclusion amounts. In effect, this means that fewer families will be subject to such transfer taxes and that many estate plans will need to be updated to properly address the new law. The changes under the TCJA present an important opportunity for high net-worth individuals and families to review their current estate planning documents and ensure that their plan is properly tailored to achieve their goals.
Overview of Changes
The most significant change is the doubling of the unified Estate and Gift tax exclusion amount – the combined amount that individuals can give away during life or at death before paying transfer taxes – from $5.59 million to $11.18 million per person. The new tax law also preserves “portability,” a surviving spouse’s ability to retain any estate or gift exclusion unused by a deceased spouse, meaning that for married couples, the exclusion is effectively $22.36 million. This exclusion is inflation adjusted, but current law provides that this doubled exclusion sunsets December 31, 2025, after which estate taxes are slated to revert to current levels.
The new law also increases the amount each person can make exempt from the GST tax. As with the estate and gift tax exclusion, the new GST exclusion will increase from $5.59 million to $11.18 million per person (in 2018 as indexed for inflation). Unlike with the estate and gift tax, however, there is no “portability” for GST taxes. Thus, each spouse must use their own GST exclusion before they pass.
In addition to the changes made by the new tax bill, 2018 also brings a routine increase in the annual exclusion from the Gift tax to $15,000 per person, per year. This annual exclusion allows each individual to make a gift of $15,000 to any other individual (and in some cases trusts) without reducing their lifetime Estate and Gift tax exclusion amount.
Review of Your Estate Plan
The changes in the Estate, Gift and GST tax law mean that many estate plans should be revised to take advantage of tax changes, ensure existing tax formulas still achieve the intended results, or simplify complex planning that is no longer necessary and shift a focus towards income tax planning for beneficiaries. There are also certain planning opportunities that you may want to explore.
First, the increased exclusion amount may be an opportunity to unwind complex planning that may no longer be needed to minimize transfer taxes. For instance, many estate plans created under assumptions of prior law provide that at the death of the first spouse, the deceased spouse’s assets are divided into two (2) separate trust shares: a Marital Trust for the benefit of the surviving spouse and a Credit Shelter Trust that may benefit the surviving spouse, your children and/or grandchildren, or combinations of those people. For married couples with large estates, this technique defers payment of any Estate tax until the passing of the second spouse. The trade-off is that the Credit Shelter Trust may not benefit the surviving spouse solely and the income tax basis of the Credit Shelter Trust is locked into place upon the first spouse’s death. Many couples who used such techniques to minimize Estate tax prior to the new increased exclusion amounts will prefer for the surviving spouse to retain greater control of assets and plan for the remainder beneficiaries to receive a step-up in income tax basis for all of the assets upon the surviving spouse’s passing. ShuffieldLowman can assist you with weighing that control over the asset protection and the certainty of the Credit Shelter Trust to determine what is best for each family.
As mentioned above, another scenario involving Marital and Credit Shelter Trusts may play out in other plans containing “formula gifts.” Certain estate plans leave assets up to the Estate tax exclusion amount to a Credit Shelter Trust for the benefit of children or grandchildren and leave assets in excess of that amount to a Marital Trust for the benefit of the spouse. Because the Estate tax exclusion amount is now so large, this could mean unintentionally disinheriting the spouse and leaving all assets to the Family Trust or just leaving significantly less to the surviving spouse than intended.
Next, we do not know if the federal increased exclusion amounts will not be extended and will in fact expire in 2025, which is what the TCJA provides. Under a subsequent administration the exclusion amounts may even return to the lower levels of the past that existed for most of the 2000s. If either of these events does indeed occur, then the current increase in the exclusion amounts provides a temporary, “use it or lose it” opportunity to transfer assets outside your taxable estate, thereby “locking in” the current exclusion amount before it is reduced and freezing values from future appreciation. This estate tax planning might involve increased contributions to Irrevocable Trusts such as Irrevocable Life Insurance Trusts, Intentionally Defective Grantor Trusts (IDGTs), sales to these types of trusts, forgiveness of intra-family promissory notes, or other wealth transfer vehicles. You may want to consider further planning using the increased exemption amounts to remove assets from the estate.
Finally, some clients may even wish to use the increased exclusion amount to unwind prior planning and bring assets back into their gross estate to obtain a step-up in basis in those assets to fair market value at the time of their death. This type of planning is geared toward reducing income tax liability of your beneficiaries upon the sale of the inherited assets.
These are just a few examples of the many ways in which the TCJA may affect your estate plan. The TCJA makes significant changes to the Estate, Gift and GST tax regimes. If your estate plan was implemented under previous law, it would be beneficial to review your plan to ensure it accomplishes your current goals in light of these changes. If you would like a comprehensive review of your estate plan, contact ShuffieldLowman today.
