Estate Planning Update
- 2019 Annual Gift Tax Exclusion: remains at $15,000 per donor, per donee.
- 2019 Gift and Estate Tax Exclusion: $11,400,000 per donor through 2025, see #6 below.
- Marital Deduction for Transfers to U.S. Spouse: unlimited.
- 2019 Generation Skipping Tax Exclusion: $11,400,000 per donor through 2025, see #6 below.
- Top rate for Federal Estate, Gift and Generation Skipping Taxes: 40%.
- National Topics: The Tax Cuts and Jobs Act signed in December of 2017 are still the most discussed topic at the Federal level. For estates of decedents dying and gifts made in 2018 and on or before December 31, 2025, the base estate and gift tax exclusion amount is doubled from $5 million to $10 million, which when indexed for inflation means an individual can shelter $11,400,000, and a married couple $22,800,000, from estate and gift taxes. This temporary doubling under the 2017 Tax Act and last year’s IRS proposed regulations eliminating the concern that estates of persons making lifetime gifts will be subject to estate taxes when the law sunsets, creates a significant opportunity for large estates. Discussions involve the consideration used (e.g., cash, stock, loans) and whether the gift is outright or in trust.
- Arizona Topics: Arizona passed two noteworthy new laws that become effective this year. First, the new LLC act takes effect September 1, 2019 for all new entities and September 1, 2020 for existing entities. The new law modifies or creates statutory rights regarding information, transferee rights, causes of dissolution, derivative actions and the fiduciary duties of loyalty and care. In certain circumstances, you may want to modify these rights before the law becomes effective. Second, Arizona’s new law, as slightly modified this past spring, validating electronic wills became effective June 30, 2019. Videotaping the signing and third party storage of the electronic document are going to be hurdles of widespread implementation, so we are not recommending that anyone rely on it in the near future.
- Estate Planning Opportunities: For the reasons discussed above in #6, anyone considering large gifts in the next ten years should begin discussing alternatives now. Market and political volatility may take away the planning opportunity that exists today. This is especially true for estates of married couples with assets over $10,000,000. Call and schedule an appointment if you want to discuss how you can take advantage of this opportunity.
- Business Planning Opportunities: The Tax Cuts and Jobs Act signed in December of 2017 reduced the income tax rate on corporations and pass through entities under §199A. The Act, coupled with an increase in business activity in Arizona, has created opportunities to modify your corporate structure to minimize income and estate taxes depending on your strategic plan, financial condition and objectives. The Act also has had a positive impact on business acquisitions, as the income tax associated with the recapture of depreciation in an asset sale is reduced and some buyers are willing to compensate sellers for such tax.
- Quinn News: Quinn had a busy spring speaking on estate planning and the new LLC Act to the Business Section of the State Bar and the Scottsdale Bar Association. He also co-authored an article on the new LLC Act in the Arizona Attorney Magazine which you can review at www.azattorneymag-digital.com/azattorneymag/201903. Please let us know if your organization is looking for a speaker on these topics.