As the first day of Heckerling kicked off, Trusts & Estates caught up with Lawrence Brody, partner at Bryan Cave LLP in New York City, and a member of the Trusts & Estates Insurance committee, to discuss his upcoming presentation, “What the Heck(erling) Is Going on with Life Insurance Planning After Tax Reform? Planning When the Only Certainty Is Ambiguity,” which he will co-present with Mary Ann Mancini, partner at Loeb & Loeb LLC and Charles L. Ratner, senior director of Washington National Tax for RSM US LLP, on Thursday.
Anna Sulkin: First and foremost, what prompted you to speak on the topic of transfer tax reform and its implications on the use of life insurance?
Lawrence Brody: It was actually Tina’s (Tina Portuondo, director of Heckerling Institute on Estate Planning) idea, given the uncertainty the tax reform proposals created at the time.
AS: Has any part of your presentation changed, given the new tax reform bill (HR 1)? If so, how?
LB: The point of the presentation was to discuss the new tax law, so it didn’t change, except to the extent the new law was different from the proposals.
AS: Given the new bill/Trump administration actions/plans, are there any new and innovative strategies for structuring new purchases that you would recommend?
LB: New purchases will likely use less premium funding than before because of the increased exemptions; employer split dollar will be more attractive, given the lower corporate and pass through rates, both because the advances are nondeductible and because the income to the employer will be taxed at a lower rate.
AS: Does the new tax reform bill have any negative implications on existing policies?
LB: Only to the extent the increased exemptions mean that policies purchased to pay the tax may no longer be needed and insurance trusts designed to keep the policy out of the insured’s estate may also not be needed.
AS: Given the uncertainty until the very end of 2017, when the bill finally passed, what is one important piece of advice you will be giving clients for 2018 and beyond?
LB: Review their plans to see if they need to be updated because of the increased exemptions.
As I’m certain their presentation will explore in more detail, 2018 is shaping up to be a busy year for estate planners, particularly when it comes to the use of life insurance in planning, as clients will likely be looking to take advantage of the increased exemptions.