The Fiscal Cliff Tax Deal Is a Game Changer for Estate Planners

The complexities of the fiscal cliff tax deal have greatimplications on income tax planning. Martin Shenkman predicts that the new estate tax rules have changedestate planning forever, especially for high-net-worth clients.  In the aftermath of the fiscal cliff tax deal,advisors will need to anticipate the new challenges that arise concerninghigher tax rates, life insurance, charitable planning, bypass trusts, assigningtitle to assets, and the harvesting of gains and losses during an estate planningmove.

Shenkmanalso warns that “the combined impact of the fiscal cliff tax deal – increasedmarginal tax rates, the new Medicare tax on passive investment income andchanging techniques for drafting and planning trusts – have changed the groundrules for many estate planning strategies.” Options that estate planners should consider include the use of“sprinkling” trusts that distribute income into lower tax brackets, the processof “decanting” into a new trust, and the practice of using a bypass trust tolower state estate taxes.

See MartinShenkman, The Post-Fiscal Cliff EstatePlan, onwallstreet.com, Apr. 1, 2013 andMartin Shenkman, Time for a NewEstate Planning Strategy?, financial-planning.com, Apr. 1, 2013.

Special thanks to Brian Cohan (Attorney at Law, Law Offices of Brian J. Cohan, P.C.) for bringing this article to my attention.