There is a new paradigm in estate planning.

The new law increases the estate tax exemption to $5.34 million per person and $10.68 million for a married couple.  Portability of the deceased spouse unused exclusion (DSUE) has been made permanent in theory.

Estate planning is now changed for estates above the $5.34 million threshold,

• For those estates below the exemption more true planning will be the norm.
• Applicable exclusion amount should not be used to transfer low basis assets,
  • Taxpayers should consider keeping as much as possible in order to obtain a “step-up” in basis for those assets in order to minimize capital gains taxes
• Income tax considerations are now more important than estate taxes.
  • Can save more in income taxes by getting a basis step-up at death
• State of Residence
  • Will give rise to very different types of estate planning because several states (19)  have a death tax.
  • You or your heirs may move to one of those states

Updating credit shelter trusts to maximize step-up in basis and provide broad flexibility in tax planning upon death of the first spouse should now be a priority for most married couples.  Widows and widowers who are beneficiaries of a credit shelter trust may need to consider distributing assets out of the trust – assuming the trust allows for this  – or decanting the trust to a more flexible trust if it does not.