IWM Advisors, LLC  166 East 61st Street–Suite 6B  New York, NY 10065

917.697.4156 peterculver@iwmnyc.com
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How Does The New Tax Act Impact You?


Tax Cuts and Jobs Act – A Game Changer

Estate Taxes – 1. The new law increases the amount that each individual can exclude from estate taxes from $5 Million to $11 Million. If you have an estate worth less than $11 Million, this doesn’t mean you’ll never have to worry about estate planning again. First, the $11 Million exclusion only lasts until 2025, when it reverts back to $5 Million.  Second, if control of the Congress shifts back to the Democrats, the exclusion could be reduced even further.  Finally, there are many important reasons to plan other than saving taxes: asset protection, philanthropy and providing a clear roadmap for the distribution of your estate, to name just a few.

Estate Taxes – 2. If you have an estate worth more than $11 Million, the Act provides a tremendous opportunity to transfer assets to children and grandchildren and dramatically reduce your estate tax. Because the exclusion may go down in the future, you should take advantage of this opportunity now: “use it or lose it”.

Basis. When the estate tax was much lower, estate planning focused primarily on transferring assets out of your estate to escape estate tax. However, in that process the assets transferred out of the estate were often assets with a low cost basis, which carried over to the heirs, and made it hard for them to sell the assets without large capital gains. Now, with large amounts of assets sheltered from estate tax, the focus has shifted to basis: it now makes sense to hold low-cost assets until death, when they will get a step-up in basis to the value at the date of death.  It may also make sense to swap assets previously transferred to heirs back to the estate to get the step up.

Income Taxes. There are a number of significant income tax changes in the Act, most importantly an elimination or substantial limitation on historic itemized deductions, in favor of an increased standard deduction. In particular, the former deductions for state and local property taxes have been severely limited to $10,000. There are some creative planning strategies to increase the amounts that you can deduct. Charitable deductions have also been limited, but again there are ways to plan around these limitations.

Business Taxes.  A key feature of the Tax Act is the reduction of the corporate tax rate to 20%.  This reduction applies not just to large corporations, but to many other ‘pass through’ business entities like partnerships and LLCs.  If you have a business entity, it may be possible to restructure it to take advantage of the lower tax rate.

Note: IWM Advisor’s Wealth Transfer group is actively helping clients understand how the new Tax Act impacts them and  take advantage of its opportunities for reducing income and estate taxes. Please contact us if we can be of help: peterculver@www.iwmnyc.com or 917.697.4156.

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