The Wealth Counselor
Taking Full Advantage of the 2017 Tax Cuts and Jobs Act
Key Points to Discuss With Your Clients
Like all things, tax laws are constantly changing. An important part of serving your clients is responding quickly and strategically to new developments in the tax law landscape. But at the same time, a knee-jerk reaction is rarely the best course of action—often resulting in unforeseen complications in the future.
The best decisions are made by professional teams working together to analyze all angles of a situation to come up with the best strategy in response to the Tax Cuts and Jobs Act (TCJA), a historic amendment to the Internal Revenue Code of 1986.
The TCJA affects many Americans in a variety of areas of life, and your clients might not be aware of what its impact will be on their long-term financial plan. Of course, this law is going on seven months old, but too many people struggle with taking action in their financial and tax planning lives, so the historic nature of these changes cannot be overstated.
The law’s benefits will accrue most for those who take a proactive approach — rather than those who wait until the last minute. Here are several reasons it needs to be top-of-mind for both you and your clients:
The new tax developments are especially pertinent to your business-owning clients. With the possible 20% income tax deduction for pass-through entities, they’ll want to review entity selection for their business operations as soon as possible. Now is also the time to consider gifting of interests to reduce the limitations inherent in the qualifying business income calculation and to utilize the increased gift tax exemption.
For clients with “specified service businesses,” such as attorneys, doctors, dentists, and consultants, it makes sense to consider separating any “non-service” businesses out of their service business, such as real estate or clerical activity. Utilizing multiple trusts may also help to facilitate business-owner clients achieve a larger QBI (qualifying business income) deduction.
Planning Goes Beyond Taxes Too
The implications of the TCJA go much further than taxes alone. Your clients will always need extensive guidance around asset protection, privacy, retaining control, avoiding issues like guardianship and probate, and ensuring that their loved ones are cared for for years to come. These aspects of financial and estate planning are constant regardless of fluctuations of tax reform. Clients who haven’t considered these issues should discuss them with an estate planning attorney as soon as possible.
These are sophisticated, complex, and multi-faceted planning strategies. For the right client, they can save tens of thousands of income tax. But they can cost dearly if implemented incorrectly. For this reason, collaboration with us and the rest of your clients’ financial team is increasingly indispensable for success. Help your clients plan for whatever comes next with the guidance of a well-rounded advisory team.
Law Offices of J.R. Hastings • 1003 Third Street, San Rafael, California 94901 • 415-450-6692