Depending on your political affiliation, there will either be great celebration or great gnashing of teeth.
Either way, successful family businesses and large family farming and ranching operations will continue to operate, employ folks (and provide them with benefits) and pay taxes back into the economy.
However, the impact on single-family offices will force them to readjust their service offerings ... and may open up new opportunities.
In fact, a recent Forbes article pointedly asks “If the U.S. Federal Estate Tax Goes Away, What Will Single-Family Offices Likely Do?”
Even if the tax were eliminated, senior executives at single-family offices will still have to look at non-estate tax estate issues.
Think transfer of control over assets and how funds are to be distributed among heirs.
Even if the estate tax goes the way of the dodo bird, estate planning will not go away.
No, estate plans will still need to be reviewed and reworked to address the inevitable changes in the laws.
Likewise, life insurance purchased to pay estate taxes will also need to be reviewed.
For example, some may convert permanent policies with meaningful cash values into private placement life insurance policies (PPLI).
What is that you ask?
Private placement life insurance is a variable universal life insurance policy that provides cash value appreciation based on a segregated investment account and a life insurance benefit.
Translation: PPLI is designed to maximize savings and minimize the death benefit.
The investment account typically uses tax-inefficient hedge fund strategies.
PPLI can be especially useful as an element of more complicated tax strategies
With advances in technology and greater efficiencies, private placement life insurance is becoming more popular for more wealthy individuals.
People who operate single-family offices are also becoming more aware of the opportunities for PPLI as part of the financial portfolios of their clients.
The use of PPLI may increase quickly and considerably if these families are no longer required to keep traditional life insurance policies purchased to pay estate taxes.
The elimination of the federal estate tax will hinge on the presidential election and how Congress acts on the issue.
Remember: “An ounce of prevention is worth a pound of cure.” When making your financial, tax and estate plans, do not go it alone. Be sure to engage competent professional counsel.
For more information about estate planning in Overland Park, KS (and throughout the rest of Kansas and Missouri), visit our estate planning website and be sure to subscribe to our complimentary estate planning e-newsletter while you are there.
Reference: Forbes (September 29, 2016) “If the U.S. Federal Estate Tax Goes Away, What Will Single-Family Offices Likely Do?”