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Estate Planning Just Got Interesting

Posted by Steve Musick | March 16, 2018


The new tax law opens up a window for planning.  It is a window that is open as long as the law is effective. Tax laws are still governed by political policies and are therefore subject to change as the political construction of Congress changes. So for now, the window is open. The amount of capital that can be transferred from one generation to another has increased substantially. Statistics now show that less than 1% of American households will file an estate tax return. The amount that can be transferred now exceeds $20M per couple. This means that many family farms and businesses can stay in families without having to pay estate taxes. Significant family wealth can continue to be handed down from one generation to another without jumping through the maze of taxation.

 

The opportunity here is limited because the law is scheduled to sunset (revert to the old law) in 2025.  When the estate tax law changed it also included transfers by gift. The law in force when the gift is made is the one that will forever apply to that gift. We can see a lot of planning opportunities where planning for family transitions using a myriad of gifting strategies will now become more useful.

Let’s get personal here. Destiny Capital is a family business. We started the enterprise in 1977, and, over the years our business has grown. The business is being transitioned to Jarrod Musick, my oldest son. Our business transition agreement, signed last year, is a simple document based on the estate tax law as it existed in 2017. Much of the agreement and the schedules were put in place for tax reasons because this is a generational transition. The new 2018 tax bill opened up a window for us to restructure our agreement, making it even more simple and tax efficient. However, we have to execute a new plan to take advantage of the new law.

The 2018 tax bill is a great development for the Musick family. By investing in a little legal work and some fees, we can take advantage of the new tax law PERMANENTLY. This is also a great development for clients of our firm as it provides for additional estate planning opportunities and greater continuity for family businesses. As a part of our work, we will continue to review your estate planning during our annual meeting. We may suggest checking with your attorney to make sure your documents reflect the new law and that the advantages become permanent for your family as well. The tax reduction window for planning is open. It’s now as important as ever to step through it.

 


 

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