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For many years, wealth preservation entailed aggressively transferring assets out of the estate of high net worth individuals to avoid estate taxes and consequently giving up a "step up" in basis adjustment for income tax purposes. Because the estate tax rates were significantly greater than the income tax rates, avoiding estate taxes was the primary focus of tax based estate planning. The new tax landscape is transformed by increased income tax rates and increased federal estate tax exemptions. It is clear that increasingly the focus of wealth preservation will move away from avoiding estate taxes and be more focused on avoiding income taxes. Much of the wealth preservation analysis will be about measuring the estate tax cost against the income tax savings of allowing the assets to be subject to estate taxes. Asset protection techniques will continue to be an important part of wealth preservation planning.
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The IRS has announced that the federal estate tax exemption for decedents who die in 2017 is $5,490,000. The gift tax annual exclusion remains at $14,000 per donee.
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AuthorMr. Hendel has been practicing wealth preservation planning for over forty years. Archives
September 2022
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