July 05, 2018

Basis Step-Up Planning: A Double-Edged Sword: A Review of Common State Law Nuances

Griffin H. Bridgers

Estate tax planning has, for decades, revolved primarily around maximization of the estate and gift tax applicable exclusion amount, with tax reform also focusing primarily on increases to this amount. With the recent enactment of the Tax Cuts and Jobs Act, P.L. 115-97, we have seen this exclusion amount increase from $675,000 per taxpayer in 2001 to $11.18 million per taxpayer in 2018. This has dramatically reduced the impact of the estate, gift, and generation-skipping transfer taxes. As a result, the focus of tax planning will likely continue to shift to income taxation. One of the biggest modern goals of tax planning now is maximizing the opportunity to obtain a step-up in income tax basis for family assets at least at the death of the client. The recent doubling of the estate tax applicable exclusion amount is certain to increase this type of planning.

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