TAX BULLETIN 2018-1: TAX REFORM SIGNED INTO LAW trust, and the balance for the surviving spouse, either outright or in a marital trust. For a hypothetical $10 million estate, if death occurred in 2017 that would result in roughly half to the bypass trust and half to the spouse. However, if death occurs in 2018 to 2025, that would result in the entire estate being left to the bypass trust. Complications could further arise for individuals living in certain states which impose their own estate tax. Wills and other testamentary documents should be reviewed to make certain they accurately reflect the testator’s wishes. As always, documents should be drafted with flexible provisions that can be adjusted for future changes. Lifetime planning. Lifetime gifts are often made in order to reduce the estate tax that would otherwise be incurred at death. While the doubling of the exemptions may avoid the need for lifetime gifting for certain individuals, that may only be the case if death occurs before 2026. Accordingly, the tax consequences of making a current gift may have to be compared with alternative estate tax scenarios. The temporary nature of the increase in transfer tax exemptions also raises the issue of whether it is advisable to lock-in the higher exemption by making a lifetime gift before 2026. (Similar issues arose in 2012, when there was uncertainty whether the $5 million estate exemption would continue in 2013.) This raises the question of whether the gift could be structured in a manner that could be “undone” if the higher exemption is made permanent. It also raises the question of whether there would be recapture (so-called “clawback”) if a lower exemption is in effect at death. In that regard, it appears that the new legislation would eliminate the concern about recapture. In sum, the uncertainty of the estate exemption amount at death will make lifetime planning more challenging. CORPORATE TAXES 2017 Law 2018 Law Top C-Corporate Rate 35% 21% (effective 2018)