On December 22, 2017, President Trump signed into effect a new tax law. While this is being referred to as a new tax law, it will have some far reaching implications regarding decisions on how you will run your business. These include such things as the structure of business – deciding to operate as a partnership, C-Corporation, S-Corporation, or a limited liability company (LLC). It will also impact financial planning, investment decisions, retirement planning, and how you will withdraw your retirement funds. This is a lot more than just a tax law.
Regarding estate planning, the new tax law doubled the amount of an estate that will be exempt from federal taxes from $5.49 million to $11.2 million (2018 inflation adjusted) for estates and gifts occurring between 2018 and 2025. For a husband and wife, the total combined transfer as of January 1, 2018 becomes $22.4 million, assuming they do it right.
The tax profession and advisors were anxiously waiting to see if Congress would retain the provision which has previously allowed estate assets to pass to a beneficiary upon the owner’s death being given a “step up in basis” equal to the fair market value of the asset on the date of death. That provision WAS retained. That was a very nice break passed out by Congress.
The tax impact of the “step up in basis” provision can be seen in my previous blog post entitled “A Parable of Two Brothers and 2 Acres”.