Estate Planning Update from the Heckerling Conference

I had the privilege of attending the Heckerling Institute on Estate Planning in January. The size of the conference is almost overwhelming with live streaming in two large auditoriums, on televisions in the hallways and even in the hotel rooms. The “Tax Cuts and Jobs Act of 2017” was of primary concern to attendees. The details of the Act are widely available as the experts are going through the language to see what effects the Act will have on specific taxpayers. I do not profess to be an expert on tax law and in my last letter may have mislead some readers with the exemption on the sale of a primary residence as the 5 out of 8 years provision did not make it into the 2017 legislation. The $250,000 single/$500,000 married couple exemption for sale of your primary residence remains available to those who have lived in their house 2 out of the last 5 years. Many of the provisions in Tax Cuts and Jobs Act are set to expire at the end of 2024. The doubling of the Estate Tax exemption from $5,000,000 to $10,000,000 plus inflation adjustments is one of those items. This provision should not affect many taxpayers, but it means that estate tax legislation will come up in the future. The highlight of the conference from my perspective was Natalie Choate. Ms. Choate is the author of the book “Life and Death Planning for Retirement Benefits” which is the treatise for professionals dealing with retirement accounts. She advocates two strategies for planning with retirement assets. For those 70 ½ and older required to take required minimum distributions should have charitable contributions made directly from the plan to the charity. The advantage of this now permanent provision of the code is even more valuable as the higher standard deduction means that fewer taxpayers will receive benefit from charitable deductions. The other strategy she advocates is naming young beneficiaries of Roth retirement accounts to stretch out the tax-free growth of the asset. Part of this strategy is to ensure that the assets remain in the Roth IRA which is best accomplished by a “see through” trust that complies with all the regulations allowing the young beneficiary’s age to determine the required distributions from the “inherited IRA”. Our office can assist your family in this strategy by drawing up standalone retirement trusts specifically designed for your children or grandchildren.

Another timely topic was in the area of using ABLE accounts for those who meet the requirement of being identified with disability by the age of 26. An ABLE account allows a beneficiary to work a low-income job that does not jeopardize their SSI benefits (approximately $11,000/year) and contribute the wages to the ABLE account which does not count against the $2,000 maximum in assets. We now have ABLE accounts in Maryland as of fall 2017. The other part of this strategy is for parents to create their own Special Needs Trust to benefit their son or daughter. Unlike the ABLE account a “third party” Special Needs Trust does not require payback for government benefits received. Our office is familiar with the requirements of these trusts and is an area where we feel good about providing benefits to those with a real need.

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