Category: The Wealth Advisor

We often think of retirement accounts as monolithic resources. It is easy to see why – we spend our working years socking away money for our future. Unfortunately, though, the rising cost of healthcare can quickly deplete even the largest of retirement funds. Because retirement accounts tend to be the largest assets in a person’s estate, it is crucial that proper planning is done to handle one’s retirement fund.

The first thing you need to do is ensure you have the assets you need to take care of yourself and your family. With the increased costs of healthcare, it is crucial you have what you need after you retire and can manage your medical expenses on a fixed income. While we would all hope for a quiet retirement, finances can be unexpectedly stressful. In addition to budgeting out a financial strategy to keep you comfortable during retirement, we can also work with your financial advisor to help you develop a strategy for distributing any leftover funds upon your death.

The rules surrounding the taxation of retirement accounts can be difficult to understand, further complicating a potentially stressful retirement experience. Upon retiring, you will have to take a required minimum distribution, which will be subject to income tax. Most people are used to having income tax withheld from their paychecks, but sometimes overlook that they will still have a similar tax liability for the money they withdraw from their retirement account.

It is also important that your strategy for passing on the account to your loved ones takes into consideration the tax consequences.  As mentioned above, because these accounts are created with pre-tax contributions (we are not talking about Roth IRAs), the required minimum distributions made to the owner are subject to income tax.  When these funds are distributed to a designated beneficiary after the original owner’s death, there are still income tax concerns regardless of who is named as the designated beneficiary. That is why working with a trusted financial advisor and attorney is so important to enjoying your golden years. With these experts on your side, you’ll rest easy knowing you’ve taken care of your family in the present and future.

Ultimately, you will benefit most from ensuring your retirement plan and estate plan align. By working with your trusted financial advisor and us, you can ensure the goals you have for your retirement and for your estate do not contradict one another. For example, you may have designated one beneficiary for your account when you signed up for your 401k but may now wish to change who or how the beneficiary will receive your assets upon your death. Or, you may have originally anticipated the excess funds from your retirement account being used to care for an aging loved one, but due to the market, you may need to find additional sources to cover these anticipated expenses. Meeting with your financial advisor and us is crucial to making sure your family and loved ones are not stuck in financial hardship after you have passed.

When it comes to retirement, it can be difficult to know what you do not know. If you are concerned about the state of your retirement account, assets and estate plan, schedule a meeting with your financial advisor and us today. With so much on the line, it pays to do your homework, connect with professionals and ensure your final wishes are documented and respected.

What is a personal property memorandum? It is a frequently-used estate planning document that provides an opportunity to expand upon your will or trust. Many wills or trusts simply divide the whole of an estate equally between surviving family members.  But, what if you’d prefer a more detailed plan for particular items you want to leave to specific individuals? 

If you’d like to ensure that specific property or items in your estate are left to certain relatives or friends, a personal property memorandum is a great option. It’s a detailed accounting of items of personal property listed with the corresponding person you’d like to receive those items.

It’s simple but powerful, and we can assist you in making one. The best personal property memorandum will work in concert with your will or trust to bequeath your estate and belongings exactly as you want. Further, it must be referenced in the will or trust to be effective. Here are four tips we need to consider that’ll ensure your memorandum works as desired.

1. Use detail

When preparing your memorandum, include specific, detailed descriptions of each piece of property. For example, if describing a car, it’s best to add identifying descriptors such as model year, model number, and color. When conveying that you’d like someone to receive a piano, rather than simply “piano,” write “my black 1980 Steinway grand piano.” For an even more exact description, you may choose to include a photograph, especially if you own many similar items.

2. Be specific about who will receive the item

Because a personal property memorandum is a legal document, you’ll want to use a full legal name and relationship. Avoid confusion that could arise from listing only a relationship, using a nickname, or other ambiguity. Your list will be clearest if you write “my daughter, Emily Smith,” as opposed to just “Emily.” Readers of the memorandum will know your intent without a doubt if they see “my daughter, Emily Smith, to receive my 1980 black Steinway grand piano.” Remember, when the memorandum becomes effective, you’ll be deceased so no one will be able to ask you for clarification.

3. Update your property memorandum frequently

For this document to be useful, it must be current. If you give away an item, to the eventual recipient or otherwise, sell an item, or if an item is lost, stolen, or destroyed, such as by fire or flood, it’s time to amend your memorandum.

If you find yourself needing to make significant changes to your memorandum, one helpful approach is to photocopy the original, make notes on the photocopy about changes you’d like to make, then use the notes to produce a new, updated memorandum. It is important that the updated personal property memorandum include all of the specific items you want distributed to the named individuals. Once you’ve concluded this process, you can avoid any confusion by shredding the old memorandum— but of course, before shredding any estate planning document, check with us.

4. Ask for help

If your personal property memorandum creates any challenges, such as an item or collection that’s difficult to describe, contact us. We’re here to help, and we can make sure your estate plan works just as you intend.

We hope these tips have been helpful. Your personal property memorandum can be an important document in the execution of your estate plan. But it must be detailed, accurate, up to date and mentioned in your will or trust to be effective.

As always, we’re here to provide personal, tailored advice as you create this essential document.

Maintaining your estate plan can feel overwhelming when faced with all the changes life can bring. Calling your attorney may not be your first instinct when you’re faced with a significant shift in income, investments, or employment, but consulting with us is a wise way to ensure your legal health is always maintained. Read on for five events that should capture your attention and prompt you to reach out to us for some personalized advice.

1. You’ve opened a new retirement account or established a new retirement plan.

As we all know, planning for one’s retirement is crucial. The peace of mind provided by a solid retirement plan is irreplaceable. The way you and your financial advisors choose to structure your retirement plan and invest your retirement assets will vary, as they are designed to meet your particular needs, wants, and goals. Keep in mind that if you open a new account, your estate plan will need to be reviewed and possibly updated as well. A new taxable investment account may need to be “funded” into your trust. If you’ve set up or started contributing to a tax-deferred account, such as a 401(k), IRA, Roth IRA, employee stock ownership plan, or another type of retirement plan, contact us about your estate plan, too, since we want to be certain that your beneficiary designation is exactly what you intend.

2. You’ve started a new job.

Congratulations! A new professional opportunity is exciting, and it is accompanied by plenty of financial change. As we’ve seen above, taking a new retirement plan or account into consideration is quite important, and a new company often means a new account. You may also have new employer-sponsored life insurance, so it’s important to seek our help to verify that your life insurance beneficiaries remain up to date.

3. You’ve kept the same job.

Even if this year finds you in the same job as last, open enrollment for life insurance from last fall is now in full effect. This means that verification of your life insurance beneficiaries and retirement plan benefits is also in order. We can help ensure that everything is as it should be.

4. You have teenaged children.

Your child’s 18th birthday is not only a rite of passage but also a significant change in legal status and planning needs. Be sure to schedule a meeting with us to learn what you and your teen need to do as your teen becomes an adult.

5. You started a business.

Whether you’ve fully jumped in or kept your day job, starting a business is a bold step! It’s in your best interest to take precautions to ensure your business is fully protected. In addition to the business entity issues, tax planning, and growing your business, there are estate planning implications with a new business. We can help you coordinate your new business with your estate plan.

We are here to help and to ensure the health of your estate. Let us bring our attention, experience, and care to the big changes in your life. Together, we can develop or enhance your estate plan to meet your goals and secure your family’s future.

LDL, 2/14/19, P:LDLikeSHAREWC Advisors ForumWealth Advisor Client Newsletter2019_02 Five Key Considerations for Your Estate Plan.docx

Strategies to Enhance Your Success

Estate planning is complex and continually evolving. Often, affluent families are “early adopters” of the newest and best estate planning strategies. Luckily, by working with us, you can benefit from the same estate planning strategies that affluent families do.  Here are a few techniques we can discuss with you if you are interested.

1. Maintain an up-to-date estate plan

The foundation of your estate plan must achieve your goals and needs.  Although a trust centered estate plan is not needed for everyone, wealthy people tend to utilize estate plans with all assets funded into or aligned with trusts.  If you do not have a trust as part of your estate plan we would be happy to meet to discuss if you and your family could benefit from such a plan.  Regardless of whether you have a trust-centered plan or not, the most important factor is that your plan should be continually updated as your life, family circumstances, and the law grow and change. Make sure your current estate plan always reflects your goals—a tried-and-true secret of the affluent. 

2. Create special trusts for special assets

Wealthy people take advantage of the legal and tax opportunities presented by unique assets or investments. Many types of assets, such as IRAs, life insurance, business ownership, and more, require specialized planning to work properly in your estate plan.

If you’ve saved for retirement, you know the value of an IRA, a 401(k) or another retirement plan. You are probably also familiar with the beneficiary designations for these plans. But, you may not be familiar with a specialized trust, called a standalone retirement trust or IRA trust. This trust lays out exact instructions about where the money in your IRA will go after you’re gone. If you’ve seen substantial accumulation in your IRA, you may not want its entirety to be disbursed to a beneficiary all at once. You’ve worked a lifetime to save, and the IRA trust empowers you to protect what you’re leaving behind. Although a standalone retirement trust is not needed in all situations it could be a valuable addition to certain plans. 

In a similar fashion, life insurance trusts give you more control over your life insurance benefits, allowing you to direct what occurs to your life insurance policy in more detail than is possible with a plain beneficiary form. It can be risky to name your minor children as the beneficiaries of your policy. If your children are not yet adults, the insurance company often requires a court-appointed guardian to receive the funds, a potentially costly and lengthy process. Many people may decide to leave the policy benefits directly to the children’s caretaker to avoid this guardianship issue. But, leaving the policy benefits to your children’s caretaker outright doesn’t ensure that the money is used for the benefit of your children. A life insurance trust can protect what you’re leaving behind and ensure it is used for the benefit of your beneficiaries.

Unlike a plain beneficiary designation, a trust also lets you designate specific uses for your money by your beneficiaries, such as educational funding. The wealthy don’t leave these things to chance and instead use proactive trust-centered planning to achieve their goals and protect their families.

3. Build a collaborative professional team

Wealthy people rarely plan and work with professionals in isolation. They know they can get better outcomes by meshing their legal, tax, and financial plans together. Rather than silo their strategies with various advisors, they ensure their team is optimizing their results through a collaborative approach.

As you build out your team, seek out professionals who are enthusiastic about working with one another across disciplines. The more visibility they have into one another’s strategies, the better they’ll be able to provide you with the best possible benefits. Call us today. We can discuss the best ways to put these and other estate planning approaches of the wealthy into action for you.

As the end of the year approaches and you begin to look back on 2018, what changes need to be reflected in your estate plan? Have you gotten married or divorced in the past year? Perhaps you’ve welcomed a new child or grandchild, or experienced a change in your health. So much can change in a year, and it’s important not to let too much time pass before those changes are reflected in your plan.

Just like you need to stay in regular contact with financial advisors, primary health care providers, and accountants, your estate plan will serve you best when it’s kept up to date with the changes that shape your life.

Keeping your estate plan current with each new significant development in your life is much more efficient than having to do a comprehensive overhaul later on. The end of the year is the perfect time to take stock of any changes regarding the individuals listed in your estate planning, like fiduciaries or beneficiaries, in case adjustments are required.

Your End-of-Year Checklist

Many people find that estate planning – whether it’s embarking on creating a new plan or updating an existing one – can feel overwhelming. A checklist cuts through the mental clutter and allows you to focus on the most important decisions so you can protect yourself and your family.

Use this handy checklist to prioritize your time.

• Has your family welcomed any new children or grandchildren?
• Has anyone named as a fiduciary (executor, successor trustee, agent under a power of attorney, or health care agent) in your plan passed away this year?
• Have you gotten married?
• Has this year involved a divorce for you or any of your fiduciaries or beneficiaries?
• Have you changed your preference about who is listed as a trustee or executor?
• Have you changed your preference about who is listed as an agent under a power of attorney?
• Have you changed your preference about who is listed as a health care proxy?
• Do you want to change who’s appointed as your children’s guardian?
• Have you had a significant increase or decrease in your net worth?
• Have you changed jobs or purchased a business?
• Did you move to a new home?
• Did you sign your will or trust before 2013?

If the answer to any of these questions is “yes,” your estate plan requires attention soon. As we head into 2019, start your year off on the right foot by taking a few moments to see what projects you should prioritize. Give us a call so we can discuss.

Estate planning is an ongoing process, not a one-time transaction. While your core objective is to help your clients remain financially sound in the face of whatever comes their way, our core objective is to ensure a client’s estate plan works when it needs to.

Planning in a Fluctuating Political Climate

Estate plans need to change when your clients experience any major life changes, such as marrying someone new or welcoming a child to the family. But clients also need to respond effectively to large-scale legal and economic changes that are external to their personal lives. Regardless of your political leanings, it’s safe to say the United States is experiencing a period of dramatic legal, economic, and political change.

Elections like the 2018 midterms – and the resulting political change – often create fear and anxiety about how the impact of new laws and tax policy will affect your clients’ lives. You have undoubtedly seized the opportunity to help guide your clients toward the smartest financial decisions they can make in light of the results. When you help them navigate the ways the changing political landscape will affect their wealth, you’ll increase loyalty and retain more assets under management

The Midterm Split: Democrats Won the House, Republicans Kept the Senate

Before the midterm elections, it was unclear how legislation like the 2017 Tax Cuts and Jobs Act would be affected. Now, we know that the House and Senate are split between Democratic and Republican control. As a result, the large-scale changes the Act brought may have an uncertain future.

So what does a divided government mean for your clients? The budget reconciliation strategy the Republicans used to pass the Tax Act will no longer be a viable option, which could slow any additional tax legislation supported by the Republican-controlled Senate. According to Kiplinger, “What is likely off the table with a Democratic House and Republican Senate is tax reform 2.0, which would make certain provisions of the 2017 tax law permanent, locking in individual and small business tax cuts. Social Security and Medicare reforms, which might have helped offset the effect of the tax cuts, are also likely off the table.”

Some Things Are Constant, No Matter Who’s in Charge

Amid so much political uncertainty surrounding the midterm elections, it’s important for your clients to remember there are many foundational constants in estate planning that are important no matter who’s in charge politically or what the tax laws look like. As part of your clients’ financial wellness team, we’re staying on top of the latest developments and will be here to guide them in matters of estate planning. We’re constantly watching the situation and will keep you and your clients informed of relevant legal and tax changes.

In order for your clients to grow and retain their wealth, careful estate planning is always a necessity – regardless of which party controls Congress. Many things may change, but a lot will remain the same: no one can legislate away irresponsible spending, divorce, lawsuits, bankruptcy, sibling rivalry, and the many non-tax reasons to complete estate planning.  An up-to-date comprehensive estate plan remains the best option for passing along a client’s wealth and values to the next generation.

We are here to help you and your clients in these changing times. Give us a call today.

What You and Your Family Need to Know

Receiving a health diagnosis or learning that you need to undergo major surgery can cause substantial disruption in your day-to-day life. During this time, the last thing you may want to think about is estate planning.

Although you may have many things going through your head at the moment, now is a crucial time to make sure your estate plan is in order.  Proactive planning can help put your mind at ease and let you focus on your treatment. Let’s review your estate plan together to make sure each of the following important components is up to date and reflects your current goals and wishes.

Healthcare documents

Your healthcare documents include your powers of attorney, advance directives, and HIPAA authorization. These documents let you appoint someone to receive information about your medical condition and to even help you make medical decisions if you’re unable to do so. You probably already know which of your loved ones you’d like at the helm if a situation arises. But whoever you’ve chosen needs to be given the explicit authority to act so that you can rest easy knowing they’ll be there to make decisions if you need them.

Financial power of attorney

While a healthcare agent or proxy can make decisions on your behalf in medical scenarios, a financial power of attorney concerns your money, investments, bills, and taxes. Although it relates to different decisions, it is just as important a designation. Having this document in place can give a trusted person (such as a spouse, child, or friend) the authority to help you with your finances and property so these issues don’t have to be a distraction while you focus on your health.

Updated trusts

An up-to-date and fully-funded trust lets you focus on your health while your successor trustee handles the affairs of your trust, which could include most, if not all of your assets. In this case, you’ll still receive the benefit of your trust but your successor trustee will manage the trust on your behalf. If there’s not sufficient time to fully fund a trust, then an up-to-date will can at least put you in control of who receives what upon your death.  When time is of the essence a will may be the only realistic planning tool, but if you already have a trust it can be a relatively easy process to update and fully fund it.

A little planning goes a long way when it comes to medically-trying times. As busy as you may be when you’re handling your own medical issues or the medical issues of a loved one, even one conversation can be enough for us to define and implement the estate planning documents that will help you feel more prepared for whatever comes next. Please reach out to us so we can chat about your needs and helping you obtain peace of mind.

New Choices and Opportunities for Tax Savings

Are you a business owner curious about the new Section 199A deduction?

Although the deduction became effective on January 1, 2018, guidance on how it would be calculated was delegated to the Internal Revenue Service (IRS) by Congress. For months, tax professionals and their clients were only able to speculate based on the text of the statute and had no specific guidance to work with.

New Developments in August 2018

This shroud of uncertainty was lifted on August 8, 2018, when the IRS released proposed regulations that answered pressing questions about losses as well as how to account for multiple businesses. We can now more accurately project or estimate how much of a deduction you’re entitled to.

These new proposed regulations introduced many new options for you as a business owner. They also bring new pitfalls as an overabundance of options can lead to confusion without the help of an expert. The complexity of the 199A proposed regulations calls for careful, strategic planning with your estate planning and financial professionals. To help you prepare for a tax-optimizing discussion, here are the highlights you should be aware of before we dive in with more detail one-on-one:

Aggregation

If you own more than one qualifying non-specified service trade or business (non-SSTB), the decision of whether or not to aggregate the qualified business income (QBI) from each business provides you with an opportunity to deduct more depending on your specific circumstances. The great news is that the proposed regulations give you the choice, so if not aggregating makes your deduction larger, we can choose to not aggregate.

End-of-Year Acquisitions

To keep individuals from buying properties for the purpose of gaining a larger deduction, the proposed regulations include a so-called anti-abuse rule excluding “property acquired at the end of the year” in the calculation of unadjusted basis immediately after acquisition if it was purchased within 60 days of the end of the tax year and sold soon after. If you’re thinking about investing in your business, make sure to consult with us and your tax professional so we can help you receive the largest possible deduction.

Clarification on Losses

Of course, everyone anticipates that business will generate profit, but that does not always happen. The new 199A regulations bring more clarity to the rules around how losses in one or more qualified trade or business are to be treated.

“Reasonable Method” Allocation

If you have multiple directly-controlled trades or businesses, you now have a new planning opportunity thanks to the “reasonable method” item allocation. If you operate multiple businesses, now is the time to make sure we can follow the rules and maximize your deduction.

SSTB Guidelines

There is an SSTB “taint” extending to trades or businesses over certain gross receipt thresholds. Luckily, the 199A proposed regulations narrow the definition of which businesses count as SSTBs. Non-SSTB businesses would do well to be extracted from SSTB as soon as possible — particularly if you can bypass the “taint” rule.

Former Employees

Unfortunately, the proposed regulations include a problematic rule for former employees with a new status (such as partners in a partnership or independent contractors) that are still being deemed employees for the purposes of 199A, which applies if they are providing substantially the same services to the former employer. This is presumably the case even if the new tax status is otherwise allowed under the tax laws. For example, a former employee who becomes a part owner in the business may be denied the 199A deduction even though she’s treated as an owner for all other non-199A purposes. This poor outcome may be overcome with proper planning and documentation. This is one area of the 199A which requires particular attention for affected people.

Multiple Trusts

There is an additional anti-abuse rule about the treatment of multiple trusts to attempt to get around QBI limits. This is similar to the reciprocal trust doctrine you may have also heard us talk about in that the QBI deduction-maximizing arrangement will be disregarded if the economics of the trusts aren’t sufficiently different.

Underpayment of Tax Penalty

IRC § 6662 already imposes a 20% accuracy-related penalty on underpayments of tax attributable to, among other things, negligence or disregard of rules or regulations; and any substantial understatement of income tax. However, Section 199A lowered the threshold for when the 20% substantial understatement penalty kicks in from an understatement of the greater of 10% or $5,000 to the greater of 5% or $5,000 “in the case of any taxpayer who claims the deduction allowed under [IRC §] 199A.” The statute does not state that the understatement must specifically relate to the IRC § 199A deduction for this lower threshold to apply; it applies if the taxpayer merely claims the IRC § 199A deduction, regardless of whether the understatement arose out of the IRC § 199A deduction or some other reporting error.

The Time to Act Is Now!

These new proposed regulations fill in many missing details from the Tax Cuts and Jobs Act of 2017 that added the new deduction, but these rules are complex and easy to mishandle. It is imperative to get help as early as possible to obtain optimum results.

It’s time to review your situation and determine whether any changes need to be made to your entity or operations to take advantage of the new proposed regulations. If you own a business, you should contact us and your CPA immediately for an entity review.

Use This Time to Revisit The Parts of Your Estate Plan That Impact Your Children Most

 
With all the considerations about your children’s wellbeing weighing on your mind from day to day, it can be easy to forget about some of the most important factors in keeping them well cared for and secure: naming a guardian in your estate plan.
 
When was the last time you reflected on your selection of a guardian? If the answer is hard to pinpoint, it’s probably time to revisit this issue. Children change a lot from year to year as they mature from infants into their teenage years. Their care needs and who would make a good guardian can change over time as well. Is the person you previously appointed as their guardian still the best choice? Because your children’s lives are constantly evolving, something that worked even a few years ago may be out-of-date now.
 
Back-to-school time is a perfect reminder to revisit your estate plan and guardianship designations. Here are the specific areas we’ll want to address:

• Review and refresh of guardianship nominations: Is the guardian you’ve chosen for your children in the event that something happens to you still the person you would want to fill that role? Are they still available to do so, and would your children be satisfied with this choice of guardian?
• Review and refresh intent letters: If you’ve used intent letters in your estate plan to provide additional meaning and context to your guardianship designations and other estate planning documents, it’s a great time to make sure those are reflective of your current goals and wishes as well.
• Review and refresh your estate plan: It’s always a good idea to keep your estate plan as up to date as possible. The addition of a new child to your family by birth or adoption may mean your plan requires substantial changes. This is also the case if one of your children has turned 18. If either of these events occurred since our last assessment of your plan, it is imperative that you don’t wait to make any necessary alterations to your plan. 
• Review college savings plans and strategies: Do you have a child who is preparing to attend college in the coming years? We can explore various planning strategies to help financially plan for the cost of tuition and help your family make strategic choices about higher education planning. It’s never too early to begin researching scholarship opportunities if you have a child already in high school. There are also a variety of accounts, such as 529s, UTMA/UGMA, ESAs, and HEETs that can be used to reduce the financial toll of tuition.
• Review the plan for your young adult child.  If you have a young adult child, perhaps away at college, that child should execute some basic estate planning documents. You must understand that your child is now legally an adult.  Should your child fall ill or have a medical emergency while away at college you may have a difficult time getting information due to the strict medical privacy laws known as HIPAA. Your child should execute a HIPAA release or authorization as well as medical and financial powers of attorney appointing you as your child’s decision maker. We can prepare these for your child and review them with him or her.

Back-to-school time means a flurry of activity for most parents. While shopping for supplies and attending school functions may dominate your to-do list, remember to set up an appointment with us to review your estate plan for any necessary updates that could impact your children’s wellbeing. We’re always here to help. Give us a call today.

Key Points to Discuss With Your Clients

Like all things, tax laws are constantly changing. An important part of serving your clients is responding quickly and strategically to new developments in the tax law landscape. But at the same time, a knee-jerk reaction is rarely the best course of action—often resulting in unforeseen complications in the future.
 
The best decisions are made by professional teams working together to analyze all angles of a situation to come up with the best strategy in response to the Tax Cuts and Jobs Act (TCJA), a historic amendment to the Internal Revenue Code of 1986.
 
The TCJA affects many Americans in a variety of areas of life, and your clients might not be aware of what its impact will be on their long-term financial plan.  Of course, this law is going on seven months old, but too many people struggle with taking action in their financial and tax planning lives, so the historic nature of these changes cannot be overstated.
 
The law’s benefits will accrue most for those who take a proactive approach — rather than those who wait until the last minute. Here are several reasons it needs to be top-of-mind for both you and your clients:

• The increase in the standard deduction and the general lowering of individual tax rates means that your clients have likely been enjoying more take-home pay.
• The elimination of the personal exemption means that depending on your client’s marital status and number of dependents, they may not be able to lower their taxable income as much as they had in the past. Some clients may face a higher tax burden, as a result, even after taking into account the lowered rates.
• The limitations on deductions for state and local income taxes (SALT) means that for those clients in states or communities with high income taxes, their taxable income may not be reduced as much as it had been in the past because they cannot get credit for all the other forms of income tax they have paid. However, if any of your clients are concerned about this, we may have some strategies (such as Incomplete Non-Grantor Trusts) to help alleviate the new tax burden.
• The reduction of the alternative minimum tax for individuals means that fewer individuals must deal with this burdensome and often-complicated tax.
• With the increase in the unified credit to $10,000,000, adjusted for inflation, there has been a reduction in the overall number of estates affected by the estate tax. If your clients had previous planning centered around saving estate tax, those plans need to be re-evaluated to make sure that they are still working towards the client’s long term objectives now that estate tax may not be a concern. Your clients may also want to take advantage of the increase by making lifetime gifts, particularly if they had previously used up their exemption in previous years.
• With the effective repeal of the individual mandate of the Affordable Care Act effective in 2019, your clients will now have the choice of whether or not to carry health insurance coverage without suffering the penalty of a fine. However, with no requirement for coverage, it is speculated that the cost of insurance in the marketplace could increase without the additional participants. Clients should carefully balance the costs of paying for their own healthcare against the cost of maintaining insurance, even after the mandate is gone.

The new tax developments are especially pertinent to your business-owning clients. With the possible 20% income tax deduction for pass-through entities, they’ll want to review entity selection for their business operations as soon as possible. Now is also the time to consider gifting of interests to reduce the limitations inherent in the qualifying business income calculation and to utilize the increased gift tax exemption.
 
For clients with “specified service businesses,” such as attorneys, doctors, dentists, and consultants, it makes sense to consider separating any “non-service” businesses out of their service business, such as real estate or clerical activity. Utilizing multiple trusts may also help to facilitate business-owner clients achieve a larger QBI (qualifying business income) deduction.

Planning Goes Beyond Taxes Too

The implications of the TCJA go much further than taxes alone. Your clients will always need extensive guidance around asset protection, privacy, retaining control, avoiding issues like guardianship and probate, and ensuring that their loved ones are cared for for years to come. These aspects of financial and estate planning are constant regardless of fluctuations of tax reform. Clients who haven’t considered these issues should discuss them with an estate planning attorney as soon as possible.
 
These are sophisticated, complex, and multi-faceted planning strategies. For the right client, they can save tens of thousands of income tax. But they can cost dearly if implemented incorrectly. For this reason, collaboration with us and the rest of your clients’ financial team is increasingly indispensable for success. Help your clients plan for whatever comes next with the guidance of a well-rounded advisory team.