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Trusts and Estates

Ca. Trs. & Estates Quarterly 2019, Volume 25, Issue 3

TIPS OF THE TRADE: THE FORMULA GENERAL POWER OF APPOINTMENT: GUARANTEED EFFICIENCY BETWEEN ESTATE TAX PLANNING AND INCOME TAX BASIS

By Mark E. Powell, Esq.* and Charles W. Daff, Esq.*

I. INTRODUCTION

The focus of estate planning has changed from minimizing estate tax to minimizing income tax. And it is no wonder—with the highest exclusion amount in history ($11.4 million in 2019), most effective tax-saving strategies involve preserving step-up in basis at death. However, planning for clients with high net worth assets presents difficulty because of the uncertainty related to the sunset of the Tax Cuts and Jobs Act in 2025 and the restoration of lower estate tax exclusion amount.1

Over the next several years, planners assisting married couples with larger estates need to weigh indeterminate factors such as the possible sunset of the current estate tax exclusion, economic conditions and possible changes in asset values, and countless other personal factors unique to each planning situation. This article presents a strategy that has remained relatively overlooked despite its promise to automatically minimize estate tax while optimizing the step-up in income tax basis, no matter the ultimate result of various uncertainties.2

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