New Rules, New Opportunities: What Financial Advisors Need to Know About the Tax Cuts and Jobs Act

The passage of the Tax Cuts and Jobs Act (TCJA) represents a veritable overhaul of almost every aspect of the U.S. tax code. The bill will take effect at the start of the year, raising the estate tax exemption, lowering the corporate tax rate, eliminating many itemized deductions, and creating a new deduction for pass-through income. The sheer size of the bill and the haste with which it was passed likely means the implications of its passage will not be fully realized for quite some time. Regardless, the impact of the new law on the economy and the stock market is sure to be substantial. A number of companies, AT&T and Wells Fargo among them, have already announced they will increase wages and bonuses for their employees in response to the law.

For wealth planners and advisors, the TCJA offers a number of opportunities. First, the 20% deduction for pass-through entities may make it worthwhile to reclassify income as deriving from a stake in a pass-through business structure. Next, the increased threshold for the federal estate tax exemption creates a window of opportunity for creating dynasty trusts. Finally, tax planning has an increased sense of urgency as taxpayers may now only deduct $10,000 in local and state taxes. In high-tax states, utilizing trusts to decrease tax liability is much more appealing and worthwhile.

See Jennifer Kelly, New Rules, New Opportunities: What Financial Advisors Need to Know About the Tax Cuts and Jobs Act, Wealth Advisor, December 21, 2017.

Special thanks to Jerry Cooper for bringing this article to my attention.