Preservation | Family Wealth Protection & Planning

With an estate tax exemption of $11.18 million in 2018 (rising to $11.4 million in 2019), estate planning has been turned on its head. For most people, estate taxes are no longer an issue, and the increased exemption provides options for reducing capital gains taxes. For those families with estates over $22.8 million, the new gift/estate tax exemption provides additional opportunities for estate tax planning.

The Tax Cuts and Jobs Act of 2017 brought a myriad of changes to the tax law, including for individual taxpayers. While certain deductions that were available to individuals have now been limited — e.g., the $10,000 limit on the state and local income tax (SALT) deduction — the standard deduction has increased to $24,000 for a married couple filing jointly and $12,000 for single filers. In 2017, the standard deduction was $12,700 for a married couple filing jointly and $6,350 for single filers.

The Internal Revenue Service has released the Applicable Federal Rates (AFRs) for December 2018. AFRs are published monthly and represent the minimum interest rates that should be charged for family loans to avoid tax complications.

Here are the rates for December 2018:

Recent changes to Missouri law could make it easier for trustees to terminate “uneconomic” trusts.

Sometimes the cost of administration of an existing trust outweighs the justification for continuing to hold assets in the trust. This may be especially true if there is a corporate trustee and the beneficiaries have no estate tax, creditor, or divorce concerns. For such a situation, Missouri law provides a mechanism by which a trust may be terminated in the discretion of the trustee, without having to go to court, if the total value of trust property is under a certain dollar limit. If the total value of trust property is below the limit and the trustee concludes that the value of the trust property is insufficient to justify the cost of administration, the trustee may terminate the trust after providing notice to certain beneficiaries.

The IRS announced cost-of-living increases for various retirement-related accounts on Nov.1, 2018. These changes for 2019 include:

• The contribution limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan is increased from $18,500 to $19,000.
• The limit on annual contributions to an IRA is increased from $5,500 to $6,000. The additional “catch-up” contributions limit for individuals age 50 and over remains at $1,000.