Moving to Plan B—Or C, D, or E

Linda Beerman
May 10, 2018

Because the future tax environment is unpredictable, clients should work with their estate planning advisors to build the appropriate flexibility into their trust and estate planning documents.
 

When tax reform—officially, the Tax Cut and Jobs Act of 2017 (TCJA)—passed at the end of last year, many wealth management clients were delighted to learn of its favorable estate and gift tax provisions. Estate planners were more skeptical, though, calling the TCJA “worrisome, complex, disjointed, nettlesome, and worse.” Perhaps the biggest uncertainty for estate planning under the new provisions is that they expire (or “sunset”) at the end of 2025, and any number of changes could be made by Congress before then.

Nevertheless, the provisions as they stand now are causing many estate planners to rethink the structure of trusts in light of new exemption amounts. Because the exemptions are so high, the estate tax affects far fewer people, so estate planners are now focusing on structuring trusts to minimize all relevant taxes, which may include capital gains taxes as well as the estate tax. While the best approach will vary depending on the size of the client’s estate and their family circumstances, one consistent theme is that the uncertainty of the new tax provisions will require clients to be very flexible in their estate planning documents.

Because the future tax environment is unpredictable, clients should work with their estate planning advisors to build the appropriate flexibility into their trust and estate planning documents. Additionally, life, family circumstances, and wealth can change over time. If documents do not allow for changes but ultimately need to be changed, they may need to be modified by a court proceeding, which can be time-consuming and costly. The best approach is to try and plan for an always unknowable future, while never forgetting that the purpose of your trust is to provide for your family. I’m reminded of an old saying: Be stubborn about your goals, and flexible about your methods.

To learn more, read the full article in the latest edition of The Advisor or listen to the audio excerpts of this interview below:

Linda Beerman serves as head of CIBC Atlantic Trust Private Wealth Management’s Wealth Strategies Group. She joined the firm in 2001, serving as its first head of Wealth Strategies and later also as chief fiduciary officer.