On Thursday, November 9, 2017, Eric Karlberg, along with Mark Anderson of Wilmington Trust and Kathleen Kazmerek of Dicicco, Gulman & Company, led a discussion on the latest topics and trends in estate planning. The conversation was thought-provoking and comprehensive. Major takeaways included the following:
- Estate planning is becoming a lot less tax-focused as estate tax exclusions go up and tax rates come down. More clients are making gifts to charity with the money they are saving in taxes.
- Clients are giving more thought to whether they should leave bequests to their children and grandchildren outright or in trust.
- Decanting is a procedure whereby a trustee pours the assets of an existing trust into a new trust, leaving behind outdated or unfavorable provisions. Recent case law affirmed that a trustee’s power to decant is a valid exercise of the trustee’s discretion to make distributions “to or for the benefit of” a beneficiary. Decanting can be a powerful tool to alleviate many issues in trusts, allowing trustees to correct mistakes, incorporate income tax considerations, combine or split trusts, add trustee powers, modify beneficial interests if needed, and add directed trustee language.
- Recent court cases have also discussed when and if the assets of a trust may be excluded from the marital estate for division pursuant to the divorce of a beneficiary. Furthermore, courts have allowed the decanting of trust property from a trust that would likely be included in the marital estate into a trust that was not.
- There is still no certainty around the tax proposals being discussed in Washington. But even if the federal estate tax goes away or becomes applicable to fewer people, there are many good nonfederal estate tax reasons why trust planning makes sense, including, among others, the presence of estate taxes in many states. Trusts are still the best vehicle to control assets after death, and properly constructed trusts offer creditor protection to beneficiaries.
- State situs for both individuals and trusts are powerful considerations when developing for income, gift, and estate tax plans.
- With the pending federal estate tax law changes, taxpayers should carefully consider whether they should make lifetime gifts that exceed their lifetime gifting exclusions (which would cause the taxpayer to pay a tax on such gifts) or whether they should delay those gifts until 2018 when any tax law changes are clearer.