Beth Kaufman Comments on the Year Ahead in Estate Tax Planning

After the Tax Cuts and Jobs Act doubled the estate tax exemption and flipped the focus for estate planners from minimizing estate taxes to minimizing income taxes, practitioners predict less dramatic changes for 2019.

Digging In

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Beth Shapiro Kaufman of Caplin & Drysdale said she’s curious about the outcome of a separate guidance project on section 1014 concerning the basis of grantor trust assets at death. She noted that it’s not clear why that guidance project exists or where the IRS might go with it.

Some have speculated the IRS might provide a basis step-up any time a grantor trust terminates at death, although Kaufman said that seems like it would be at odds with the statute and overly optimistic. Or the regs could have something to do with the treatment of foreign grantor trusts, she added. The IRS stated in 2018 that it would stop issuing private letter rulings in that area, which is something it often does before issuing guidance, according to Kaufman, a former attorney in the Treasury Office of Tax Legislative Counsel.

Kaufman said she is also looking forward to the final regulations under section 2642(g) providing relief for missed generation-skipping tax elections. The Treasury-IRS priority guidance plan listed that as a “burden-reducing project,” and Kaufman said because the proposed regs were “rather burdensome,” she is hopeful the final regs will relax some of the proposed regs’ requirements.

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Eye on the Courts

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According to Kaufman, the various and contradictory ways that states tax trusts have been an ongoing source of litigation, and recent state court decisions have found some state laws to be unconstitutional. More litigation is likely, and there could be interest in drafting a uniform law, she said.

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Excerpt taken from the article “A Look Ahead: Estate Tax Planners Foresee Return to Normalcy” by Jonathan Curry for Tax Notes.