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Trump Triumphs on Estate Tax Reform

Trump Triumphs on Estate Tax Reform
(DreamsTime)

By    |   Tuesday, 19 December 2017 10:46 AM

The Tax Cuts and Jobs Act looks like a sure passage at this moment.

A triumph for President Donald Trump and a tribute to his policy of keeping his campaign promises.

For years, make that decades, the Republican Party has promised to reform or eliminate the death tax. When push came to shove, they wimped out every time.

Consequently, estate planning was primarily a tax avoidance exercise with human dynamics and financial security trailing in the distance.

This time around estate tax reform turned out different.

Instead of politics winning out over principle, Trump forced the GOP into standing up for principle instead of their usual politics of kowtowing to the Democrats.

Up to now, the top priority for estate planning professionals involved bobbing and weaving through the complexities of the estate, gift, and generation-skipping transfer taxes. Plus all the difficulties of valuing privately owned assets to please and appease the tax bureaucracy.

Trump’s estate tax reform puts the needs of the taxpayers in planning their estates first.

As a result, planning for family issues, business dynamics, asset protection, and financial security become the focus of estate planning instead of being dominated by tax machinations.

For likely 99% of the taxpayers, estate, gift, and generation-skipping transfer taxes will not even be a consideration in the planning process.

The proposed finalized form of the Tax Cuts and Jobs Act doubles the exemption from death tax to $11.2 million for an individual and $22.4 million for a married couple.

As part of Trump’s prior Executive Order to eliminate regulations, a proposed and highly contentious regulation by the Treasury severely limiting valuation discounts was revoked.

In appraising privately owned property, like closely-held businesses, real estate, and intellectual property, a true fair market value calculation involves taking the gross value and deducting appropriate discounts. The revoked Treasury regulation intended to impose an alternate methodology and then mandate the use of the higher phantom value for tax purposes.

For estate planning next year, combining the higher tax exemption amount with the proper valuing of property means that estates even larger than the exemption amount will be free of the death tax.

Most, if not nearly all, estates consist of a taxpayer’s home, retirement funds, closely-held business interests, and some investments—or a combination of them.

These assets which support a taxpayer’s financial safety net are extremely sensitive to income tax.

The income tax reform provisions forced through by Trump will enable private business and investors to build up financial security during their lives with the estate tax reform allowing that hard-earned financial legacy to pass on to the next generation free-and-clear.

Yes, Trump could not push the Republicans to repeal the estate tax entirely.

But, if truth be told, he has gotten farther in reforming the death tax system than any Republican President in modern times. It’s a remarkable achievement.

As to the 1% of the estates of the rich still subject to estate, gift, and generation-skipping transfer taxes, some of the richest of them publicly said that they were for keeping the death tax system.

Well, they got their wish much to the relief of their estate tax lawyers, accountants, valuation consultants, insurance agents, and the plethora of other professional service providers who live off taxing death.

For all the rest of us in the 99%, let’s just say Thank God Trump triumphed on estate tax reform.

Denis Kleinfeld is known as a strategic tax and wealth protection lawyer, widely published author and creative teacher.

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Tuesday, 19 December 2017 10:46 AM
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