1. Estate Planning After the 2017 Tax Act
Kirsten Burmester
Beth Shapiro Kaufman
Megan E. Wernke

2. Overview Brief summary of relevant provisions of Act
Case Studies: Planning Discussion

3. Estate, Gift, GST Basic exclusion doubled No change to basis rules
Increased from $5 million to $10 million, indexed from 2011
Expected exclusion for 2018: $11.18 million
Chained CPI-U
No change to basis rules
No rate change
Doubled exclusion sunsets 12/31/2025
Clawback concerns

4. Individual Income Taxes
Top bracket declines to 37%
Tax rates the same or lower at all income levels
Trust and estate rates still compressed
Kiddie tax: applies trust and estates brackets
37% at $12,500 and over

5. Deductions for Individuals
Standard deduction increased ($24,000 married, $12,000 single); no personal exemptions
$10,000 limit for state, local and foreign taxes
Limited deduction for home mortgage interest
Suspension of deduction for interest on home equity indebtedness
Repeal of Pease limitation on itemized deductions
Elimination of alimony deduction (2019)
Suspension of deduction for itemized deductions previously subject to 2% floor

6. Deductions for Trusts
Same limitations as individuals with regard to state and local taxes
Distribution deductions under Section 651 and 661 are still available 
Personal exemption continued for trusts and estates
Can still deduct expenses that would not have been incurred but for the existence of the trust or estate (e.g. trustee fees, appraisal fees, trust accountings)

7. Other Changes for Individuals
Alternative minimum tax retained, exemptions increased
Roth IRA conversions allowed, reversing it disallowed
529 Plans expanded to qualified expenses for elementary and high school education, up to $10,000 per student per year
Limited rollovers from 529 account to ABLE account
Increased limits for charitable donations of cash to public charities (60% of AGI)

8. Taxation on U.S. Businesses C Corporations
Corporate income tax flat rate of 21 percent
Corporate AMT repealed
Corporate net operating losses limited
No sunset

9. Taxation on U.S. Businesses Flow-Through Entities
Deduction of 20% of qualified business income under new Section 199A
Subject to limitation to greater of:
(i) 50% of the taxpayer’s allocable share W-2 wages; and
(ii) 25% of the taxpayer’s allocable share of W-2 wages plus 2.5% of depreciable property in service.

10. Taxation on U.S. Businesses Flow-Through Entities cont.
Income must be earned in a “trade or business”
Income items such as capital gain/loss, dividends, interest, commodities transactions, hedging, currency gains are excluded
However, qualified REIT dividends, qualified income from publicly-traded partnerships and qualified cooperative dividends can be deducted

11. Taxation on U.S. Businesses Flow-Through Entities cont.
Threshold amount is $315,000 for married couples and $157,500 of all other taxpayers
Limitations phase in at income over $100,000 for married couples and $50,000 for all others
Top marginal rate of 29.6% (37% top rate * 20% deduction=29.6%); plus 3.8% Net investment income tax =33.4%, if applicable
Sunset provisions apply

12. International Estate Planning
Exemption for NRAs remains at $60,000
No change to rate schedule or definition of U.S. situs property

13. Case Study A Akiko is a widow whose husband died in 1995
She and the children are beneficiaries of a credit shelter trust originally funded with $600,000
Current value of trust assets = $1,000,000
Akiko’s other assets are valued at $3,000,000
Akiko is 89 years old

14. Case Study B
Bing and Bonnie are 65. They have two children and four grandchildren. They live in Virginia (no state estate tax).
They have assets of $10 million
Current estate plan relies on portability
Variations:
Live in state with estate tax
Second marriage, they each have two children and four grandchildren
Assets of $20 million
Age 85

15. Case Study C Carlos and Carmen are in their 40s
They are both long-term green card holders living in California
They have three minor children
They have assets in excess of $100 million, largely from the sale of a business Carmen started and sold
Both Carlos and Carmen are currently involved with new start up businesses

16. Case Study D Dieter is a non-resident alien, age 76
His children and grandchildren are US citizens
He owns a $50 million portfolio of US equities through a BVI company

17. Case Study E
Eduardo owns a successful construction business worth $20 to $40 million, as well as a large home and other assets
Ed and Esther have 5 children, all minors
Ed supports his mother Bianca, who is 75, has very few assets, and is in relatively poor health

18. Case Study F
Fatima is a 85 year old widow whose husband Farhad died 20 years ago
Prior to Farhad’s death, they formed an FLP and funded it with real property and securities
Farhad’s interest in the FLP passed to their 3 children and 3 GST trusts at his death
Fatima made gifts of ~$5 million prior to this year
Fatima still owns 27% of the FLP (FMV ~$4 million)
Fatima has assets outside the FLP (FMV ~5 million)

19. Case Study G
Giselle is a French citizen and resident; she is not a U.S. citizen
She plans to purchase a vacation home in Miami
Variation:
She plans to invest in a rental property in Miami