Tax reform is no simple matter. Fairness is a holy grail, winners and losers are driven by political economics, and unintended consequences abound. If my decades long study of taxation has taught me anything, it’s that the actual tax opportunities and challenges on the ground are often far different than envisioned by those writing the tax legislation, and even by the IRS in converting the new law into “workable” regulation.
And so it is with the new push to reform taxes as we approach the mid-twenty-first century. Both the Senate and House bills – subject to compromise, horse trading, and eventual reconciliation before being sent for the President’s signature. Both bills in current form offer substantial estate tax relief. The House version repeals the estate tax entirely as of 2024, while the Senate version keeps the tax but doubles the transfer tax exemption – the tax free amount – from over $5M per person or about $11M per couple to over $22M per couple effective for 2018. On the surface, this is great news for those worried about estate taxes. The problem is that since it is virtually impossible that the bills would pass with the supermajorities needed to make the changes permanent…making it nearly certain that this year’s version of any estate tax repeal will be as temporary as the last one signed by President George W. Bush in 2001…where the estate tax was repealed fully for 2010 but returned in 2011. The prudent will plan on a return of or increase in estate taxation later this century, assuming one’s death can’t be timed as precisely as to make jumping through a 2010-only tax hoop cost effective.
So the advice from Camarda is to continue to use planning techniques like SLATs, dynasty trusts, family limited partnerships and the like to freeze estate values at tax free levels, and take advantage of any temporary estate tax perks like increased exemptions or repeals to accelerate the planning to freeze and defund your estate. With inevitable increasing deficits and the inevitable shifting of power between Democrats and Republicans, Camarda thinks the estate tax is bound to not only return but become much more oppressive in the years to come.
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