Estate Planning Blog

Estate Planning Taxes: No Change…for Now

Last year, with a new administration in Washington, several changes to estate planning tax laws were proposed in Congress that would have significantly impacted the estate plans of high-net-worth individuals. While none of these proposed changes came to pass as initially proposed, those same proposals could be brought to the table again in 2022. Below, we provide you with an overview of what hasn’t changed—yet.

Unified Credit Limit

In 2017, the unified credit was temporarily increased to $11.7 million for individuals and double that for married couples. Estates up to the unified credit threshold of $12.06 million are still exempt this year from estate and gift taxes, but proposed changes would cut that limit by over half. One strategy for married couples to capture the current exemption limit is the Spousal Lifetime Access Trust (SLAT), described in more detail here.

Grantor Trust Advantages

Though proposed changes sought to eliminate many of the benefits of the grantor trust, its advantages as an estate planning tool remain in place. Grantor trusts are useful tools because they remove assets from an individual’s taxable estate as well as allowing trust income to be taxed to the grantor without diminishing the growth to trust assets. Because grantor trusts may still be in jeopardy, individuals currently using or hoping to use such a strategy should contact McBrayer about options for capturing current advantages.

Traditional and Roth IRAs

Under current law, individuals can still add to their retirement accounts regardless of the balances of those accounts prior to their contributions. The ability to implement Roth conversions, or the “backdoor Roth,” is also still available. However, proposed legislation has targeted these types of retirement accounts, attempting to limit contributions, raise minimum distribution requirements, eliminate Roth conversions, and restrict investments of IRA funds. Any of these proposed changes may resurface in Congress this year.

The future of estate tax law is uncertain, but we know you want to be certain that your legacy is secure. Contact the McBrayer estate planning team today to discuss strategies for achieving your goals.

This blog was authored by the McBrayer Estate Planning Group.

Ivan Schell is a Member of McBrayer PLLC. His multifaceted legal practice includes estate planning and administration, private foundation and public charity formation and planning, physician practice consultation and healthcare law, employee benefits law, and closely-held corporation planning transitions. He can be reached at ischell@mcbrayerfirm.com or by calling 502.327.5400, ext. 2351.

Sean Mumaw is a McBrayer Member practicing out of both the Louisville and Lexington offices. His practice area focuses on estate planning but also includes tax (estate, gift, income, and inheritance), general business law, business succession planning, real estate, and the like. He can be reached at smumaw@mcbrayerfirm.com or 502.327.5400, ext. 2304.

Alan N. Linker is a Member of McBrayer law in the firm's Louisville office. His extensive experience in managing wealth transfer arrangements, gifts, and legacies makes him an integral part of McBrayer’s estate planning practice. Alan specifically works with the estate plans of high net worth individuals, corporate executives, and their families. He can be reached at alinker@mcbrayerfirm.com or 502.327.5400, ext. 2326.

Phillip A. Pearson is an Associate of McBrayer Law. His practice focuses primarily on estate planning and administration in addition to tax planning. He works in the firm's Louisville office and can be reached via email at ppearson@mcbrayerfirm.com or via phone at 502.327.5400, ext. 2341.

This article does not constitute legal advice. Services may be performed by others.