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Despite all the unknowns about

higher estate taxes, married taxpayers

have options that could minimize

their overall tax burden.

his article discusses some strategies that mar- of a wide variety of strategies to minimize the
ried taxpayers can use to manage their estate value of their estate assets and their tax liability.
Ttax liability by creating certain types of trusts. These included tactics such as aggressive lifetime
During the past 10 years, the federal estate tax has gifting to family members, discounting of minority
not been a major concern for most family financial interests, and, most significantly, a wide variety of
planners because of the high lifetime exemption creative trusts. The good news is that these strate- About the
($12.06 million for individuals and $24.12 million gies are generally still available today. author
for married couples in 2022), which exempts a vast However, like everyone else, married taxpayers Thomas J. Stemmy,
majority of clients from its reach. But as of this have been putting off revising their overall estate CPA, CVA, E.A.,
writing, with possible tax reform ahead, tax plan- plan because of the unknowns about the size of is president/
ners are uneasy because they cannot estimate with the lifetime exemption and whether they will be managing partner
reasonable certainty how much estate tax a client subject to estate taxes at all. And many married of Stemmy, Tidler
family could be facing (if any at all). couples have chosen to keep estate planning and & Morris PA in
Tax professionals are fully aware that certain their wills as simple as possible. They often feel that Annapolis, Md.
changes in the estate tax are already scheduled to it is sufficient to simply name their spouse as the
happen because the sunset provision of the 2017 beneficiary and, wherever possible, title their assets
law known as the Tax Cuts and Jobs Act (TCJA), jointly, as joint tenants with rights of survivorship
P.L. 115-97, calls for the lifetime exemption per in accordance with the laws of their state. They
individual to be dramatically reduced to $5 million often think that this is adequate for a good estate
(adjusted for inflation) in 2026. But the sunset plan because of the unlimited marital deduction,
provision might be only the beginning of a slide which permits a taxpayer to pass assets to a surviv-
toward more dramatic increases in the estate tax — ing spouse and remain free from estate taxes (as
in one form or another. long as the spouse is a U.S. citizen) (Sec. 2056).
At the time this is being written, proposals to However, some married clients need to be
further increase death taxes in the near term have reminded that the unlimited marital deduction
been widely publicized. There have also been calls for assets that go to a surviving spouse merely
to raise capital gains and other taxes and (worst of defers estate taxes, it doesn’t avoid them. During
all for taxpayers) eliminate basis step-up for appre- a transitional period like the present one, pass-
ciated assets now permitted under Sec. 1014. These ing all your assets directly to your spouse could
proposals give rise to much uncertainty for estate be a big mistake. For one thing, the surviving
planners, who would prefer to have clearer answers spouse’s estate will include all the property that
about what changes might lie ahead before they was transferred from the first spouse. Second, the
modify anything with their clients’ estate plans. surviving spouse’s estate may be subject to higher
taxes in view of proposed new tax legislation. Third,
Planning an estate with all the unknowns about and most important, unless an estate tax return
increasing estate taxes is prepared making the portability election, any
Over a decade ago (before the era of super-high unused lifetime exemption from the first spouse
exemptions) taxpayers were eager to take advantage could be lost forever.

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