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Oxford Financial Group, LTD


Oxford Financial Group, LTD


Expert Perspective

News, research and market insights from our team of experts.


Current Issue | December 20, 2018

The New Year Brings Both Certainty and Uncertainty

By: Kara Talbott, CPA/PFS, CFP®, Senior Wealth Strategist

On December 18, 2015, the "Protecting Americans from Tax Hikes Act" (PATH) of 2015, was enacted into law. This Act retroactively reinstated for 2015, most of the tax extenders that expired at the end of 2014. This Act also made many of the provisions permanent.

One of the most popular provisions made permanent was the "Charitable Rollover", or "Qualified Charitable Distribution" (QCD). While the Act made the QCD retroactive to Jan. 1, 2015, it was enacted at the end of day on Friday, December 18, leaving many IRA administrators discouraged, at best, as to their ability to process requests prior to the December 31, 2015, deadline. The real gift of the PATH Act "extender", however, was permanency. Individuals can now plan well in advance to take advantage of this planning opportunity.

Once individuals reach age 70 ½ and are required to begin taking minimum distributions from their IRA, they may take advantage of this provision. Individuals can make up to $100,000 a year in gifts to a public charity directly from their IRA. The recipient charity may not be a donor-advised fund, supporting organization or a private foundation. The transfer must be made directly from the IRA custodian to the charity. Those gifts count towards the required minimum distributions they must take annually from their traditional IRAs, but are not included in their adjusted gross income.

Other key extenders made permanent include the deduction for state and local sales taxes in lieu of income taxes, the American Opportunity Tax Credit for college tuition and the Enhanced Child Tax Credit. The Act also extends through 2016, the exclusion for cancellation of debt income related to qualified principal residence indebtedness.

There were also several key elements relevant to business owners including the following:

  • Section 179 made permanent, with expensing limitations and phase out amounts of $500,000 and $2MM, respectively
  • Bonus depreciation extended through 2019 (50 percent of the cost of property acquired and put in service during 2015, 2016 and 2017, phased down to 40 percent in 2018 and 30 percent in 2019)
  • R&D Tax credit
  • Made permanent, the rule reducing to 5 years (from 10) the period for which an S corporation must hold assets following a conversion from a C corporation (to avoid tax on build in gains)
  • Extension of 15 year straight line cost recovery for qualified leasehold improvement and certain retailers
  • 100% of gain exclusion on certain 1202 small business stock

2016 will have its own share of trends and developments to watch that will undoubtedly impact some of the estate planning strategies we have employed for many years during what has been a protracted period of low interest rates. In her article "Estate Planning 'Squeeze and Freeze' Strategies: The Impact of Potential Interest Rate and Regulatory Changes", Julie Weaver discusses the possibility of a higher interest rate environment and how that may affect some of our favorite estate freezing strategies such as Grantor Retained Annuity Trusts (GRATs) and sale transactions. She also looks at further impact on these and related strategies if the IRS issues regulations limiting valuation discounts on various entities that are often used to fund such transfers.

Finally, the beginning of the year is always a good time to think about organizing, updating and setting new goals. Reviewing estate planning documents may be a timely activity during the first quarter of 2016. In her article, "The Value of Choosing a Professional Trustee/Personal Representative", Kate Borkowski discusses how a professional trustee or personal representative can bring value, experience and expertise to trust and estate administration.

We hope your New Year is starting on a positive note and that these articles will bring timely and relevant information as you begin planning discussions for 2016.