Is your estate plan up-to-date? A year-end review as part of your overall tax planning is a good idea, especially in light of recently issued proposed rules that will make significant changes to certain estate planning techniques. Here’s what you need to know.

What’s changing. The new rules will limit the “valuation discounts” created when assets are transferred between individuals. These discounts help reduce the amount of your assets subject to gift and estate taxes, and are particularly relevant when you have more than $5,450,000 in assets ($10.9 million for a couple). Since the top estate and gift tax rate is 40%, taking advantage of these discounts can help reduce the tax bill on your estate.

Who’s affected. This type of estate planning usually involves the use of a family limited partnership to transfer ownership of assets such as businesses and real estate from parents to children. With this strategy, control of the partnership is dispersed among family members, making the partnership assets harder to sell. Due to the difficulty in selling, the value of the assets is reduced, creating a valuation discount. Once the rules go into effect, you may have to pay more gift and/or estate tax when utilizing this type of estate planning.

When the change will happen. Currently, the new rules are expected to be finalized in January 2017.

Contact us for details, and to schedule a review of your estate plan.

NOTE: This newsletter is issued annually to provide you with information about minimizing your taxes. Do not apply this general information to your specific situation without additional details. Be aware that the tax laws contain varying effective dates and numerous limitations and exceptions that cannot be summarized easily. For details and guidance in applying the tax rules to your individual circumstances, please contact us.

–Next: Part IV – Keep Up with Affordable Care Act Information Reporting–

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