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“Permanent” changes to estate planning may not be permanent, P.2

In our last post, we noted that changes could be coming in 2018 with respect to tax exemption amounts because of a proposal in President Obama’s 2014 budget plan. Changes could also be coming in terms of how to approach family inheritance planning. One area is that of discounted values on assets given to minorities.


Currently, an appraiser can legally discount the value of business assets given to family member, if the assets represent a minority share in the business. President Obama’s proposals, up until now, have called for limiting or cutting out such discounts for family members. Commentators say that could be because the administration is already preparing to issue regulations to do it, so that it is coming soon.

President Obama’s proposed budget would also require Grantor Retained Annuity Trusts to have a minimum term of 10 years, which means that those who set up such trusts to avoid taxes on future appreciation on assets take a larger risk that they will die during the GRAT term and face estate tax on the entire value of the assets placed in trust.


So-called “dynasty trusts” could have the chair kicked out from under them, as President Obama’s budget proposal would have the generation skipping transfer exemption expire after 90 years, after which point the assets would be subject to taxation.


The budget proposal would require most heirs of individual retirement accounts to empty those accounts within five years, which would prevent them from stretching their withdrawals across their life expectancy and paying income tax only on distributions. This proposal has already prompted many to consider moving their wealth concentrating in IRAs into trusts to help their families follow the rules correctly and avoid penalties.


Each of these proposals is intended to generate money and help solve the ongoing budget crisis. Unfortunately, it is also forcing people to plan ahead and continue changing their estate planning strategies.

Source: Source: Wall Street Journal, “Estate Planning: New Hazards,” Kelly Greene, April 26, 2013.