The Times They Are A-Changing (for Estate Planners)

The corporate tax cut is permanent, but most individual provisions of the Tax Cuts and Jobs Act (Pub L 115–97, 131 Stat 2054) are set to expire for tax years beginning after December 31, 2025. These expiring provisions will tax the ingenuity and patience of estate planners and their clients. What to do? The legislation doubles the applicable exclusion amount (AEA) from $5 million to $10 million plus cost-of-living adjustments ($11.2 million in 2018) for gifts made and decedents dying in 2018–2025, but the AEA reverts to $5 million plus cost-of-living adjustments in 2026. IRC §2010(c). As a result, practitioners now have no idea what the AEA will be on a single client’s death, let alone on the death of the surviving spouse for married clients. Fortunately, the standard trust plan for married couples copes fairly well with the current uncertainty. Basically, the trust document gives the surviving spouse a marital deduction qualifying income interest in all…

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