Tax Planning

Tax bill creates adviser challenges for long-term planning

Consultant recommends taking advantage of tax moves that are immediately available for clients

Jan 17, 2018 @ 5:00 pm

By Ryan W. Neal

The biggest problem with the new tax bill, according to Steven Siegel of consulting firm The Siegel Group, is that so much of it is temporary.

Nearly every provision passed in the Republican Tax Cuts and Jobs Act will sunset in 2025. A more apt name for the bill would be "FEFAL – Full Employment For Accountants And Lawyers," said Mr. Siegel, speaking at the Investments & Wealth Institute's Investment Advisor Forum in New York on Wednesday.

"They have created a very interesting set of rules that can be defined by the very technical term, 'a mess,'" Mr. Siegel said.

(More: Oops! Unintended consequences of tax-law changes)

Provisions could change even sooner if the political pendulum swings back to the left in 2020 or 2024, making things difficult for financial advisers trying to craft long-term plans for clients.

That doesn't mean advisers should take a "wait-and-see" approach with clients when it comes to estate planning.

"Taxes aren't the only reason you do estate plans," Mr. Siegel said.

Advisers can still help clients look out for their families and their businesses, he said.

They should take advantage of the current bill as much as they can because politicians are more likely to grandfather in plans than they are to tax someone retroactively, he said.

"Clawbacks are unlikely, so using exclusions while they are available and possible is good planning," Mr. Siegel said.

(More: 8 top tax and estate-planning tips)

Advisers should look at the new tax bill as a chance to start conversations about new considerations that the tax bill introduces, he said. The tax bills make it essential for advisers to engage in income tax planning, asset protection and wealth preservation.

For example, state income tax planning is more important with the repeal of the SALT deduction, and advisers can consider creating incomplete non-grantor trusts in states with no income tax. Or advisers can recommend clients use upstream gifting to elderly family members to reduce capital gains tax.

"These are things that you, as the understander of [client] financial portfolios and everything else, can talk about. These are all things you want to think about," Mr. Siegel said.


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