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Fax: 617.951.9929

Year End Estate and Gift Tax Planning Considerations 2017

on . Posted in Estate Planning Blog

As the New Year approaches, there are a number of planning techniques that individuals should consider implementing before December 31, and after the first of the year, to take advantage of estate and gift tax savings opportunities.  

Gifts to Individuals

Individuals may limit the growth of their taxable estates by making annual lifetime gifts. The 2017 limit on such gifts is $14,000 per donee per year.  In addition, in 2017, married couples can gift up to $28,000 to each donee in 2017, if each spouse gave the limit individually or if the donors agree to split joint gifts for tax purposes.  In 2018, this limit increases to $15,000 per done per year ($30,000 for married couples who agree to gift split).  It is important to remember that a donor is not limited to a certain number of annual exclusion gifts every year.  By making annual gifts to multiple beneficiaries, individuals may transfer significant wealth over time.  The gift is considered to be made on the date the donee receives the gift.  However, in the case of checks, the donee must cash the check before the end of the year.  Since the gift tax annual exclusion is based on a calendar year, individuals also may wish to make 2018 gifts in early January 

Individuals interested in creating or adding to 529 Plan accounts for children or grandchildren should make the contributions before year-end and consider front-loading the accounts with five years’ worth of annual exclusion gifts. 

Individuals wishing to pay a beneficiary’s medical or educational expenses should make payments directly to the institution, not to the individual.  If the payments are made this way, they will not be counted against the donor’s annual or lifetime gifting limits, so the donor can do both. 

The federal estate, gift and generation-skipping transfer (GST) tax exemptions are each $5 million per individual ($10 million per married couple), increased for inflation. After adjusting for inflation, the exclusion amount for deaths in 2017 is $5.49 million and for deaths in 2018, the tax-free amount will be $5.6 million per person.  Utilization of the $5 million exclusion provides significant opportunities for lifetime gifting beyond the annual exclusion, educational and medical care gifts outlined above.  Lifetime gifting is an effective strategy for the tax-efficient transfer of wealth because gifts remove future appreciation on transferred assets from an individual’s taxable estate.  In states like Massachusetts where there is an estate tax, but not a gift tax, individuals can reduce their state-level estate taxes if they transfer assets through gifts instead of relying on testamentary transfers.

Although the current federal estate and gift tax laws were enacted with the goal of providing permanence to the federal transfer tax laws, it is possible that changes could be on the horizon. President Trump’s plan for tax reform includes the repeal of the federal estate and generation-skipping transfer (“GST”) tax.  At present however, Trump’s plan for reform does not include a repeal of the gift tax.  And it is unclear on whether Trump intends to reduce the “step-up in basis” that dramatically reduces the capital gains tax that heirs would otherwise pay when selling certain inherited assets.  The likelihood of these changes being enacted is uncertain; however, they are worth keeping in mind for the coming year.

Gifts to Charities

Gifts made to charities enjoy the dual benefits of reducing estate tax exposure and yielding current income tax deductions.  Such transfers must be effectuated on or before December 31 in order for donors to reap the tax benefit in 2018, when 2017 tax returns are filed and income tax is due to be paid.  It is important that donations be delivered to the charity before December 31, as the deduction is recognized on the date the charity receives the gift, not the date the check was written.  The tax benefits of charitable gifting can be enhanced by gifting appreciated assets.  By donating appreciated assets, the donor avoids capital gains tax that would have been realized upon a sale of the property.  The charity can sell the property and benefit from its value without paying this tax. However, if a donor sells the asset and then donates the proceeds to charity, the donor would be subject to the capital gains tax on the sale. 

There are certain charitable giving techniques by which individuals can make charitable donations and obtain a charitable deduction, but retain an interest in the property for life or a certain term.  Depending on the individual’s goals, these can be structured in many different ways.

Review of Estate Planning Documents

It is advisable for individuals to review Wills, Trusts and other estate planning documents periodically. The end or beginning of each year is a good time for this.  When reviewing estate plans, individuals should consider these questions:  

1.      Do the provisions still accomplish your goals?

2.      Have your documents been updated to take advantage of changes to tax laws?

3.      Do your documents contain provisions that provide asset protection to your children, grandchildren and other loved ones? 

4.      Are the fiduciaries named (Personal Representative/Executor, Trustee, Power of Attorney/Agent-in-Fact, Health Care Agent) still appropriate? 

5.      Are your Durable Power of Attorney and Living Will on file with family members and health care providers?

6.      Have estate planning concepts, funeral arrangements and decisions on anatomical gifts been discussed with family? 

7.      Are your life insurance policy and retirement plan beneficiary designations still appropriate and in line with your overall estate plan? 

8.      Are bank accounts and other assets titled in line with your overall estate plan?

9.      For business owners, are buy-sell agreements and the related valuations and life insurance policies up to date? 

Please contact any of the attorneys in Pabian & Russell, LLC's Estate Planning practice group if you would like to discuss any of these matters. 

Year End Legal Issues

on . Posted in Corporate Law Blog

     Despite the balmy Fall weather, we are in November and approaching the holiday season.  Before your social calendar kicks into high gear, we recommend that you schedule time to conduct an annual corporate review to make sure you are ready to roll into 2018.  The review should address the following topics: 

1.           Annual Reports and Filings – Make sure that you maintain good standing in the jurisdiction in which you incorporated and any other jurisdictions in which you are registered to do business by filing all required annual reports.  Failure to keep up with these reports will cause you to incur additional costs and may result in the administrative dissolution of your entity.

2.           Minutes – Prepare and file shareholder and director minutes for all transactions that were not undertaken in the ordinary course of business – new long term contracts (leases), executive salary increases, bonus plans or distributions, benefit plans, and shareholder or commercial loans.

3.           Contracts – Are any of your contracts, including leases, up for renewal?  Do you need to give notice of termination or renewal?  It is wise to diary these dates in advance so you do not inadvertently miss a critical deadline.

4.           Employment Policies – Update your employment manual to reflect any changes in the law.  A hot topic in Massachusetts are changes related to the new sick leave law. 

5.           Loans – Review loan covenants for compliance as well as financial reporting compliance to prepare for Q1 2018. 

6.           Tax Planning - Review tax planning and related issues with your accountants and legal advisors to ensure that any actions that you can take any necessary actions before the end of the year.

Please feel free to reach out to me with any questions or if you wish to schedule time for a year-end review.  

The Cost of Aging

on . Posted in Elder Law Blog

A recent national financial survey measuring the cost of care, showed an alarming rise in the cost of long term care for our aging population. Articles by Tom Murphy, of the Associated Press, and by CPA Practice Advisor, analyzed the results of this survey and concluded that the cost of long term care has increased an average of 4.5% between 2016 and 20017. This increase is nearly close to three times the national inflation rate (1.7%). 

The survey indicates that the cost of various forms of long term care have increased dramatically. For example, care at home has increased in the following ways:  

  •   At home aide services have increased 6.17% to $21.50/hour.
  •   Homemaker services have increased 4.75% to $21 per hour.


Despite a steep increase in cost, at home care remains the most economic option for many.

  • The price of care outside the home has also increased significantly.
  • Adult day services have increased 2.94% to about $70/day.
  • Assisted living facilities have increased their prices 3.36 % to $123/day or $3,750/ month.
  •  Individuals with a semi-private room in a nursing home care facility can expect a 4.44% price increase to $235/day or $7,148/ month.
  • Individuals with a private room in a nursing home can expect a 5.5% price increase to $267/day or $8,121/ month.

Facilities increase their prices due to a variety of factors including higher minimum wage requirements, competitive labor markets, and compliance with the Affordable Care Act which requires companies with more than fifty full time employees to provide health care coverage. Additionally, these services in general have seen price increases because Medicaid often times does not cover the complete cost of an individual’s long term care, which therefore causes healthcare providers to increase their price to cover their expenses. Medicare’s restrictive rules also cause more and more patients to have shorter hospital stays, which leads to sicker patients being sent to rehab nursing facilities.

Keep in mind this is a national survey. In Massachusetts, costs of at home care can be up to $25 per hour. Assisted living facilities can be between $5,000 and $10,000 a month and nursing homes can range between $10,000 and $15,000 a month.

Many people expect the government will pitch in with the cost of their long term care needs. However, Medicaid (the biggest federal payer of long term care) has very strict criteria, particularly very strict gifting rules and asset requirements for applicants.

Due to these high costs and strict public benefit rules many people without private coverage are forced to spend down their assets until they qualify for Medicaid. This is why it is so important to start conversations about long term planning sooner rather than later. One- third of Americans aged 40 and over have not begun planning for their future care needs. As the Baby Boomer generation ages, it is important to start talking and planning financially for their needs as they age. These are critical discussions which can lessen the financial and emotional burden of aging on both you and your family.


     If you would like to speak to someone about your long term care planning needs, one of our Elder Law attorneys would be happy to speak to you at 617-951-3100.

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