As a tax professional you’re already familiar with your individual clients’ tax situations, as such, helping them plan for their financial future makes logical sense.
Moreover, as you consider ways to offer more value-added, even advisory-based services to your clients, considering estate planning strategies may be a viable option. Below are several, simple avenues to consider in the realm of estate planning services:
Wills: Ensure they have them and they are current.
Guardianships: For clients with children, it's critical they name guardians or the state would decide who the children live with.
Living Trusts: Consider these as an alternative to outright ownership of assets. In many situations, living trusts are preferable because the administration will bypass the probate court.
Beneficiaries: Ensure proper beneficiaries are named to each account.
Life insurance policies: Ensure policies for the right amount are in place, including for businesses.
Retirement plan rollovers: Organize and consolidate old plans as needed.
Inventory and documentation: Help client inventory and document their current assets and be sure accounts are named correctly to avoid confusion.
You should also be familiar with the estate planning provisions included in the Tax Cuts and Jobs Act (TCJA). Here are the high points:
Estate and Gift Tax Exemption
Under tax reform, the federal estate, gift and generation-skipping transfer (GST) exemption has doubled – from $5.49 million in 2017 to $11.18 million in 2018 for individuals, and from $10.98 million to $22.36 million for married couples, subject to increase with inflation each year. This applies to estates of descendants dying and gifts made after December 31, 2017, and before January 1, 2026. Remember to take into account state exemption amounts, which may not have changed.
The doubling of this exclusion may impact your clients' current estate plans. As The Wall Street Journal reported in 2017, the Joint Committee on Taxation estimated the number of taxable estates would drop from around 5,000 under prior law to 1,800 under the new law.
The rule allowing for a step-up in basis of inherited property to the fair market value at-date of death remains unchanged and there is a $15,000 annual gift tax exclusion for 2018.
Your clients have the option of paying gift taxes in the year they make the gift or using a portion of the exemption; much of the time, it doesn't make sense to pay the tax in advance.
Retirement plans received a slight tweak under the TCJA by repealing the rule allowing the re-characterization of converted Roth IRAs to traditional IRAs. It's still okay to contribute to a Roth IRA, transition it to a traditional IRA.
They can also contribute to a traditional IRA, then convert it to a Roth IRA. However, your clients cannot unwind a Roth conversion. The rules for doing the initial IRA conversions have not changed and are still allowed.
As we’re past the filing deadline for tax year 2018, now is a great time to meet with your clients and help them better understand their finances so they can prepare for long-term prosperity. Offering advice in estate planning is a good start.
One note: some of these tips cross over into some legal areas, so be sure to have your clients consult with an attorney as necessary.
Jim Buffington, CPA, customer liaison with Intuit ProConnect co-authored this article.
Mike D'Avolio is senior tax analyst with the Intuit Professional Tax Group, he has been a small business tax expert for more than 20 years and serves as the primary liaison with the IRS for tax law interpretation matters, manages all technical tax information, and...