We hope the information in this letter is helpful to you as 2019 winds to a close. If you have any questions, we would be happy to assist you. Best wishes for a healthy and joyous holiday and New Year.
Democratic House and Upcoming Presidential Election
As a result of the 2018 Midterm Elections, Democrats now make up the majority of the House of Representatives while the Republicans continue to hold a narrow majority in the Senate. As predicted, the Democrats aimed to make several changes to the 2017 Tax Act, but were met with opposition from the Republican Senate and White House, meaning that few—if any—substantive changes were actually made in the last year.
Read more on page 1
2019 Estate, Gift and GST Tax Exemption and Exclusion Levels
Making gifts of appreciating or income producing property to younger, lower income generations can be a fruitful tax savings strategy because those younger generations often have a lower effective tax bracket and all post-gift appreciation accrues outside of the donor’s gross estate (i.e., estate tax base). When making lifetime gifts, it is important to consider the tax exemptions and exclusions that are currently available.
Read more on page 1
The “SECURE” Act and Potential Changes to Retirement Savings
On May 21, 2019, the House passed the Setting Every Community Up for Retirement Enhancement Act of 2019 (the “SECURE Act”) almost unanimously. However, since that time the SECURE Act has stalled in the Senate, but given the bipartisan support it received in the house it is something worth monitoring as we move toward the end of 2019 and the beginning of 2020.
Read more on page 1
The Supreme Court Takes on State Income Taxation of Trusts in Kaestner
In general, U.S. Constitutional law requires a state to have a sufficient connection—or “nexus”—with a trust before the state may impose tax on the income of the trust. Each state has developed its own criteria regarding what constitutes a sufficient nexus with that state such that a trust will be subject to state income tax and, therefore, be deemed a “tax resident” of that state. When a trust is a “tax resident,” generally all trust income may be taxed by the state; when a trust is a “tax non-resident,” however, only source income from that state may be taxed by the state.
Read more on page 2
Estate and Gift Tax “Clawback”
While there is much uncertainty in today’s political climate, taxpayers with potentially taxable estates can rest easy knowing that even if the increased lifetime gift (and estate) tax exemption amount reverts back on or before January 1, 2026, the IRS will not attempt to “clawback” the tax on gifts previously made by the taxpayer during the increased exemption period.
Read more on page 3
Newlyweds No More: Florida Documentary Stamp Tax Exemption Now Available to All Married Persons
In general, Florida imposes a documentary stamp tax on all transfers of real property between individuals based on the consideration paid. For purposes of this tax, consideration includes the balance of any underlying mortgages or other lien encumbering the property.
Read more on page 4
2019 Retirement Plan Contribution Limits
Making contributions to retirement plans can be a good way to help maximize tax savings. The contribution limit for 401(k) elective deferrals in 2019 is $19,000, but individuals who are 50 years old or older may make an additional elective deferral of up to $6,000 as a so called “catch-up” contribution. These contribution limits for 401(k) plans are expected to increase to $19,500 and $6,500, respectively, in 2020. The elective deferrals for 401(k) plans must be made by the end of the year in order to receive the tax benefit for that year.
Read more on page 4
Estate Plan Review and Monitoring Changes in the Law
We recommend that you review your estate plan periodically to ensure it is updated taking into account your current family situation, your current asset structure, your dispositive wishes, tax provisions currently in effect, and your trustee selections. Each of these aspects of your plan necessarily changes over time. The New Tax Act has granted us a variety of new opportunities but some of those planning opportunities have a limited shelf-life, especially in light of the upcoming 2020 Presidential election. Now is the time to take advantage of such opportunities. You should also check to make sure that your assets are properly titled, and beneficiary designations for insurance, retirement plan and annuities are properly completed, so that your estate plan operates as intended.
Read more on page 5
If you have questions about the content of this letter, please contact one of our Private Wealth Services attorneys.
