J.K. Lasser's New Rules for Estate, Retirement, and Tax Planning

Stewart H. Welch, III, J. Winston Busby

• Publisher: Wiley
• Year: 2019
• Print ISBN: 9781119559139
• eBook ISBN: 9781119559085
• Edition: 6
• Topic: Personal Development
• Subtopic: Personal Finance

The popular handbook to estate planning, now updated for 2018

Since its first publication in 2002, New Rules for Estate, Retirement, and Tax Planning has sold more than 40, 000 copies, providing a solid, accessible introduction to estate planning for any age or income bracket. Now in its sixth edition, Estate, Retirement, and Tax Planning continues this tradition, covering such topics as trusts, donations, life insurance, and wills in easy-to-understand language that offers valuable insights and solid strategies to help you preserve your wealth and plan your estate so that your assets go where you want with a minimum of taxes and government interference. This comprehensive guide answers such common questions as: How much do I need to retire comfortably? How do I protect my children's inheritance? How do I ensure planned donations are made after I'm gone? And many more.

The Sixth Edition is also fully updated to reflect changes following the 2018 Tax Cuts and Jobs Act, so that you can learn how new regulations could impact your inheritance and trusts. Other notable features include advice on working with elderly parents and introducing financial planning to children and teenagers, in addition to a list of professional advisers and a glossary of estate planning terms.

• Understand estate planning and obtain solid strategies for growing your wealth
• Explore asset protection and succession planning strategies
• Discover how recent updates to the tax code could affect you and your heirs
• Stay informed of any relevant law changes with an author-managed web site

Estate, Retirement, and Tax Planning contains a wealth of valuable information for any adult who needs help planning their financial future, from the established professional heading toward retirement, to the young adult looking to understand the basics. Wherever you are in your journey, use Estate, Retirement, and Tax Planning to ensure your legacy is protected.

CHAPTER 1
Tax Cuts and Jobs Act of 2017

President Trump signed new tax legislation on December 19, 2017, that will significantly impact many Americans. The title of the new law was intended to be the Tax Cuts and Jobs Act. However, due to certain procedures involved in passing the new law, the short title was removed and the official title is “To provide for reconciliation pursuant to title II and V of the concurrent resolution on the budget for fiscal year 2018.” Despite the issues surrounding the name, the new tax law is commonly known as the Tax Cuts and Jobs Act and will be referred to in this book as the TCJA.

The TCJA sets forth the most extensive changes to the tax law in more than 30 years, although many of the provisions are set to expire after 2025. The TCJA significantly impacted both individual and corporate taxpayers. Individual tax rates were reduced, and individual deductions were modified. Taxpayers operating businesses through flow‐through entities, such as LLCs, S corporations, or sole proprietorships, received a favorable new deduction for certain types of income. The TCJA reduced corporate tax rates for corporations taxed as C corporations. In the estate and gift tax arena, the TCJA doubled the amount of wealth that may pass tax‐free to nonspouse, noncharitable beneficiaries.

Although the TCJA made changes to many areas of the tax law, not all the provisions of the TCJA are permanent. Most provisions took effect on January 1, 2018. The TCJA included a sunset provision stating that many provisions will expire after 2025. For instance, the TCJA created provisions regarding individual tax reform that extend through 2025. However, the changes to business reform measures are generally permanent. Taxpayers should become familiar with an overview of the TCJA and its effect on income tax provisions, business tax provisions, and estate and gift tax provisions.

Ordinary Income Tax Rates

The TCJA effectively changed individual income tax rates from 2018 to 2025 for all Americans other than those under the 10 percent tax bracket.

The TCJA shifted the marginal tax rates for Americans making more than $9,525. The marginal tax rates for middle‐class Americans are subject to a progressive rate structure as income increases. The ordinary income tax rates under the new law are: 10 percent, 12 percent, 22 percent, 24 percent, 32 percent, 35 percent, and 37 percent. However, the TCJA dramatically altered the income brackets to which the tax rates are applied. For example, the marginal tax rate of 35 percent, which previously encompassed $424,950–$426,700, now encompasses an income bracket of $200,000–$500,000. See Table 1.1 for a complete review of the schedule for joint and single tax filers for 2018. The marginal brackets are indexed for inflation and set to increase beginning in 2018.

TABLE 1.1 Schedule of Individual Income Tax Rates

Single Filers
2018	10%	12%	22%	24%	32%	35%	37%
Year	$0–$9,525	$9,256–$38,700	$38,701–$82,500	$82,501–$157,500	$157,501–$200,000	$200,001–$500,000	$500,001+
Joint Filers
2018	10%	12%	22%	24%	32%	35%	37%
Year	$0–$19,050	$19,051–$77,400	$77,401–$165,000	$165,001–$315,000	$315,001–$400,000	$400,001–$600,000	$600,001+

Capital Gains Tax Rates and Qualified Dividends

The TCJA maintained the favorable maximum capital gains rates of 15 percent for all Americans making less than $425,000 ($479,000 for married filing jointly), indexed for inflation. For wealthier Americans, the maximum capital gains rate will be 20 percent. Similarly, the 15 percent rate on qualified dividends will apply to taxpayers making less than $425,000 ($479,000 for married filing jointly), indexed for inflation. For taxpayers with incomes above those thresholds, dividends will be taxed at 20 percent.

Educational Provisions

Prior law introduced many tax benefits for implementing an educational savings plan. With respect to the TCJA, prior benefits were retained by extending the American Opportunity Tax Credit for Higher Education Expenses through 2025 as well as the addition of new benefits in some areas. Some of these benefits are highlighted below.

Education IRA

The TCJA continued the opportunity for taxpayers to contribute to a Coverdell Education Savings Account. Because of some of the restrictions outlined below and the enhanced features to 529 plans under the TCJA, most taxpayers will likely utilize the benefits of a 529 plan under the new law as opposed to Education Savings Accounts. Nonetheless, the features of these accounts under the TCJA include:

• Permanently increased the contribution limits from $500 per year to $2,000 per year.
• Distributions, when used to pay for qualified education expenses, are tax free.
• Allowed tax‐free withdrawals for elementary (including kindergarten), secondary, and postsecondary school tuition and expenses.
• Included tuition, room and board, tutoring, uniforms, extended day program costs, computer technology hardware and software, Internet access, and special needs services for special needs beneficiaries as qualifying expenses.
• The age limit is waived for special needs beneficiaries.
• Contributions can be made until the donor's due date for their federal income tax return.
• For donors who are single tax filers with a modified adjusted gross income (MAGI) of between $95,000 and $110,000 ($110,000 and $220,000 for married taxpayers filing jointly), the contribution limits are (ratably) phased out. These MAGI thresholds are adjusted annually for inflation.

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Tip

If you would like to make a contribution to an education IRA for your child but you do not qualify because your adjusted gross income (AGI) is too high, consider having your child contribute to his or her own account. Unlike other IRAs, a person does not have to have earned income to contribute to an education IRA, nor is there a minimum age requirement. Contributions cannot be made for beneficiaries who are 18 years of age or older.

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Section 529 Plans

529 college savings plans were expanded through broadening the meaning of “qualified higher education expenses” to include tuition at public, private, or religious elementary or secondary schools, limited to $10,000 per student during the taxable year.

Business and Corporate Tax Relief

Under prior law, the business taxpayer was allowed to immediately...

Table of contents

• Cover
• Table of Contents
• Acknowledgments
• Introduction
• CHAPTER 1: Tax Cuts and Jobs Act of 2017
• CHAPTER 2: Estate Planning
• CHAPTER 3: The Estate Tax System
• CHAPTER 4: Investment Strategies for Maximizing Estate Growth
• CHAPTER 5: Retirement Planning: Living Your Dream
• CHAPTER 6: You Don't Have a Will? Big Trouble!
• CHAPTER 7: Where There's a Will, There's Your Way!
• CHAPTER 8: Using Trusts in Your Estate Plan
• CHAPTER 9: Understanding the Living Trust
• CHAPTER 10: Using Insurance in Your Estate Plan
• CHAPTER 11: Smart Strategies for Gifting Assets to Family Members
• CHAPTER 12: Strategic Planning with Charities
• CHAPTER 13: Family Limited Partnerships
• CHAPTER 14: Succession Planning for the Family Business or Farm
• CHAPTER 15: Asset Protection Strategies
• CHAPTER 16: Personal Business Planning Issues
• EPILOGUE: Dealing with Parents and Their Money
• APPENDIX A: Professional Advisers
• APPENDIX B: Estate Planning Terms
• APPENDIX C: IRS Life Expectancy Table
• About the Authors
• Index
• End User License Agreement