#Estate planning checklist 2020 free#

Given that the increased federal exemption amounts are currently set to sunset at the end of 2025, it may be prudent to make use of these increased amounts before they disappear (with the caveat that the law may, of course, change, and as part of a deal to make other changes, the exemptions may remain where they are). Planning to Utilize Increased Federal Exemptions Note: Each state has its own laws addressing 529 Plan withdrawals, and not all states provide that withdrawals for K-12 tuition will be exempt from state income taxes, so taxpayers should consult with their advisors to confirm the state-specific rules. The earnings on these withdrawals will be exempt from federal income tax under the TCJA. As a result, the owner of the 529 Plan can withdraw up to $10,000 per beneficiary each year to use towards K-12 education. Under the TCJA, qualified withdrawals of up to $10,000 can now also be made from 529 Plans for tuition in K-12 schools.

#Estate planning checklist 2020 free#

Historically, withdrawals from 529 Plans have been free from federal income tax if the funds were used toward qualified higher education expenses.

The TCJA expanded the benefits of 529 Plans for federal income tax purposes. Taxpayers should consider the potential tradeoffs of using the increased exemption amounts during their lifetimes to gift assets to others, as opposed to retaining appreciated assets until their death so that those assets receive a stepped-up income tax basis. Taxpayers should review any existing formula clauses in their current estate plans to ensure they are still appropriate given the increase in the federal exemption amounts and the implications of the potential sunset of these exemption amounts. Many estate plans use “formula clauses” that divide assets upon the death of the first spouse between a “credit shelter trust,” which utilizes the client’s remaining federal estate tax exemption amount, and a “marital trust,” which qualifies for the federal estate tax marital deduction and postpones the payment of federal estate taxes on the assets held in the marital trust until the death of the surviving spouse. The following is a summary of several items that should be considered for planning purposes: This is the time for individuals to build flexibility into their estate plans and to use this window of opportunity, where appropriate, to engage in planning to take advantage of the increased estate, gift and GST tax exemptions.Īs the existing tax landscape is still in effect as of December 21, and looks unlikely to change before the end of the year, particularly in light of the results of the midterm elections, taxpayers should review their existing estate plans and consult with their tax advisors about how, where appropriate, to best take advantage of the higher exemption amounts while they are, in all events, available. While the permanency of the TCJA’s provisions still remains uncertain, the current environment provides a great deal of opportunity for new planning.

Given the uncertain political landscape, practitioners continue to view this temporary increase in exemption amounts as an unprecedented opportunity for valuable estate planning. Absent legislative action by Congress, many of the changes imposed under the TCJA - including the increased exemptions - will sunset after December 31, 2025, with the laws currently scheduled to revert back to those that existed prior to the TCJA. Most significantly for estate planning purposes, the TCJA temporarily doubled the estate, gift and generation-skipping transfer (GST) tax exemptions. At the end of the day, while a form of the BBBA passed the House (which form did not include a change to the aforementioned exemption amounts), the BBBA ended up being dead on arrival in the Senate.Īs outlined in our previous Year-End Estate Planning Advisories, the TCJA made significant changes to individual and corporate income taxes, restructured international tax rules, provided a deduction for pass-through income and eliminated many itemized deductions. We noted in our 2021 Year-End Estate Planning Advisory that there was a lot of uncertainty about whether the BBBA would be enacted and, if so, whether it would bring about a change in the estate, gift and generation-skipping transfer (GST) tax exemptions. Byer, JDĭuring 2022, COVID-19, the war in Ukraine, global inflation, the Tax Cuts and Jobs Act (TCJA), the uncertainty about the Build Back Better Act (BBBA), the Corporate Transparency Act (CTA), and the Inflation Reduction Act (IRA) dominated the planning landscape.