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The Cruelest Month


“April is the cruelest month….” T.S. Eliot

April is the month most tax payers hate. Not only do we spend the first quarter gathering information, but we may have to pay the Department of Treasury, not only for last year, but also estimated taxes for the coming year. After that, most of us don’t think of income tax for the next year, let alone the issues of estate taxes. The new tax law, however, should give you pause as it probably has created new complexity in your estate plan. Any plan created in the past should be reviewed to avoid getting shocked by provisions of the new law.

First, the amount exempt from estate taxes increased to 11.2 million and the portability rules would allow a couple to avoid taxes under a combined amount of 22.4 million. Seems great, but the law is set to expire in 2025, which creates uncertainty for any plan that anticipates the death of a spouse beyond that expiration date. Couples who have plans that create an exemption trust and a marital trust, which for years was the favored structure, should review their plan because capital gain taxes and other issues could become a problem in these plans.

Also, the new law seems to encourage gifts to minors because of the greater exemption amount. In the past, the “Kiddie Tax” taxed the investment income of a child at the parents’ tax level. Now the “Kiddie Tax” rate is separate from the parents’ tax rate, which means the child’s tax could be as high as 37% even though the parent has a lower tax rate.

My law professor in Estates and Trusts said that Congress and the state legislatures should seldom change the estate tax laws so that people could make plans that didn’t change repeatedly. Congress didn’t listen to him. You need to consider what the new law does to your future plans this year. Now is the time to protect your assets with appropriate planning