Let’s be honest: There aren’t a lot of changes to the estate planning laws or the tax regulations coming in 2016. But some evolving and subtle changes to these laws are likely to impact your clients. Wise estate planners will get out in front of these and alert their clients to what they can expect.
Here are some of the moves that your clients should be aware of in 2016.
1. Most recently, President Obama signed the Protecting Americans from Tax Hikes Act of 2015 (PATH) into law on December 18.
PATH extends certain IRS provisions that had expired at the end of 2014 and makes other changes to the tax code, most pertinently with respect to real estate investment trusts.
The most significant changes limit the tax advantages for spin-off transactions involving a REIT. The new rules say that a REIT spin-off qualifies for tax-free treatment only if, immediately after the distribution, both the distributing and controlled parties to the transaction qualified as REITs. There are other restrictions on REIT transactions made on or after December 7, 2015, as well. If your clients are involved in REIT investing, it makes sense to familiarize yourself (and them) with these new regulations.
2. Another important change in the PATH legislation may affect many wealthier clients.
Taxpayers who are 70 ½ or older will now permanently be able to make tax-free charitable donations directly from their IRA accounts, and have them count as required minimum distributions.
The bill extends the provision retroactively to January 1, 2015. So if a client transferred money from an IRA to a charity anytime in 2015 — even before the law was signed —the transfer qualifies as a required minimum distribution.