After much talk and no action about tax reform, the legislature and other government leaders finally announced some major potential changes that would directly affect estate-planning practitioners. First, Republican leaders released a 9-page framework for tax reform, which included the proposed repeal of the estate and generation-skipping transfer taxes (although not touching gift taxes). Less than a week later, Treasury Secretary Steven Mnuchin recommended that the proposed Internal Revenue Code Section 2704 regulations (proposed regs) be withdrawn. Those proposed regs would have restricted the use of partnerships and other entities to generate valuation discounts. According to the report, “the Treasury and the IRS plan to publish a withdrawal of the proposed regulations shortly in the Federal Register.”
But, there’s still a general feeling of uncertainty, as we wait to see if repeal will become a reality or if some other deal will be reached that causes repeal of the estate tax to fall by the wayside. And, even though the withdrawal of the proposed regs looks like a done deal, as estate-planning attorney Martin M. Shenkman has noted, if we have a Democratic sweep in 2020 or 2024, it’s possible that the proposed regs might be reincarnated and reintroduced in some form.
As the dust settles, we must move forward with planning for our clients. For example, what effect do all the potential changes have on elderly clients who may be purchasing life insurance or evaluating the insurance they already have? Jamie L. Mendelsohn and Keith Buck try to answer this question in, “Are Your Senior Clients’ Estate Liquidity Plans About to be Trumped?” p. 25.
And, we still need to help clients who may be residents of or have assets in other countries. This month’s International Practice Committee Report covers developments in Russia, Japan and the United Kingdom, as well as compliance with new Internal Revenue Service Form 5472 reporting requirements by foreign owners of U.S. disregarded entities.