October 3, 2016

IRS Proposed Regulations May Affect Estate Planning

On August 2, 2016, the IRS issued a proposed regulation (REG – 163113-02) that may have a significant effect on estate planning, amending Sec. 2704 of the Internal Revenue Code. The proposed regulations would prevent taxpayers from discounting the valuation of assets being transferred to family. Currently, transfers of assets such as real estate or businesses to family members may be made at a reduced value for gift and estate tax purposes. The new law may make it more costly for families to retain family-controlled businesses, focusing on the treatment of lapsing rights and restrictions on liquidation in determining the value of transferred interests.estate planning

The proposed regulations are subject to a 90-day comment period, which will be open until November 2, 2016. A hearing will follow, open to the public, and the regulation could become law as quickly as 30 days after publishing the final rule (possibly in the first quarter of 2017). As proposed, the new rule will only apply to future transfers; it will not apply retroactively.

We recommend discussing how this potential change could affect your estate plan with your advisor. You may want to consider taking advantage of tax-leveraged gifting in 2016, before the new law goes into effect. This serves as a helpful reminder to review your estate planning documents periodically to make sure they reflect any changes, whether personal or legal.

To read the full proposed regulation, visit https://www.gpo.gov/fdsys/pkg/FR-2016-08-04/pdf/2016-18370.pdf