Estate Planning Newsletter - First Quarter, 2018 - Estate Planning and Wealth Preservation under the Tax Cut and Jobs Act of 2017

by Hinshaw & Culbertson LLP

Charitable Gifting Strategies
The Tax Cut and Jobs Act of 2017 ("TCJA") repealed most itemized income tax deductions and increased the standard deduction—now $24,000 for married couples filing jointly, $18,000 for heads of household filers, and $12,000 for single taxpayers. The only itemized deductions remaining are for state and local income taxes ("SALT"), but they are limited to a total of $10,000 per year, mortgage interest, again subject to certain limitations, and charitable deductions. Thus, married taxpayers with no mortgage interest deduction will have at least $14,000 of standard deduction over and above the deductible SALT. For many, that would mean charitable deductions in that year are non-deductible. One might make two or three years' worth of contributions to make them deductible in one year and take the next year or two off. If over 70½ with an IRA or other retirement plan, the best strategy is to direct the custodian to transfer any amount up to $100,000 to a charity or charities, which will not be taxable to you or the charity. Additionally, such a distribution (referred to as a "Qualified Charitable Distribution" or "QCD") satisfies the Minimum Required Distribution requirement. You can make a QCD every year thereafter if you so choose

What is a Donor Advised Fund and Why Should I Care?
A Donor Advised Fund is like having your own private foundation to make charitable gifts, but without the high cost and complicated rules. You can set one up with a local community foundation, or a national brokerage firm like Fidelity or Schwab, with an initial contribution as low as $5,000. After funding the Donor Advised Fund ("Fund"), you direct the Fund to make distributions to the charities you select. Because the contribution to the Fund is deductible when you initially make the contribution, you can utilize the charitable deduction in that year for a contribution which is large enough to be an itemized deduction even if you make no distributions to any charity for years afterward. Generally, the sponsors of Donor Advised Funds impose a fee and you cannot get the assets back, but you can make a significant tax deductible contribution in one year and arrange for gifts to your favorite charities every year with no missed years when employing this doubled up contribution strategy.

Review Existing Estate Plans Now
If you created your will or revocable trust several years ago and expected your estate to be subject to federal estate tax, it may no longer be an issue for most of us given the new approximately $11.2 million exemption per person required for federal estate tax. Your existing estate plan likely calls for the exempt amount to fund a trust called a "Family" or "A" trust, also known as a "credit shelter trust." Under the TCJA, all assets will go into that trust up to the $11.2 million limit. The problem, however, is that the tax basis for those assets is the date of death value at your death and any appreciation between your death. When the assets are distributed at the death of the surviving spouse, they will be subject to capital gains tax when sold. If those assets had been left to your spouse or another person, there would be no estate tax, and when that individual dies, the assets and any appreciation would again escape estate tax due to the federal estate tax exemption of that individual. Further, if the assets you leave to your spouse and the assets owned by your spouse are in excess of $11.2 million, your spouse can use any of your unused federal estate tax exemption (referred to as the "deceased spouse unused exemption" or "DSUE"), so no federal estate tax would be incurred until the combined total of your assets and your spouse's assets are over $22.4 million. An estate tax return must be filed for the first spouse that dies even if the estate is not taxable to establish the DSUE amount to be used at the surviving spouse's death.

Can I Ignore Estate Planning Due to the TCJA?
In a word, "No." If you live in a state with estate tax—like Illinois, where estate taxes are due if your estate is in excess of $4 million—you may want to postpone or avoid the state estate tax by funding a trust for the surviving spouse that satisfies the requirements to be a Qualified Terminable Interest Property ("QTIP") trust for state estate tax purposes with the assets remaining after funding a Credit Shelter Trust with the amount exempt from the state estate tax. The executor or trustee will make a state QTIP election on your estate tax return. The assets held in the trust after the death of the surviving spouse will be subject to the state estate tax if (1) the surviving spouse is still a resident of a state that imposes state estate taxes at the surviving spouse's death, and (2) the assets have not been distributed in the meantime to your surviving spouse for support or health care. Also, the TCJA sunsets in 2025, which means the federal estate tax in 2026 will be reinstated with a $5 million exemption indexed for inflation unless the TCJA is extended by Congress (based on the current rate of inflation the exemption is expected to be slightly in excess of $6 million in 2026). Since the current high federal estate tax exemption threshold will only be in place for 8 years, it may be prudent to include a bifurcated plan in your estate planning documents: one in the event that the $11.2 federal estate tax exemption would result in no federal estate tax (providing for an outright distribution of all assets to the surviving spouse), and another that provides for the funding of a credit shelter trust with the amount in excess of the exemption to be distributed to your spouse, or held in a marital trust if that is the better approach given the exemption available.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Hinshaw & Culbertson LLP | Attorney Advertising

Written by:

Hinshaw & Culbertson LLP

Hinshaw & Culbertson LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at:

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.