Make the Most of Tax Reform

©2018 Wilmington Trust Corporation and its affiliates. All rights reserved.

Three themes to maximize your wealth planning potential

key points• Estate tax planning:

Take advantage of the higher estate, gift, and generation-skipping transfer tax (GST) exemption—which was nearly doubled under the new tax law

• Income tax planning: Take advantage of other state jurisdictions to reduce or mitigate your current (or future) state and local income taxation

• Charitable planning: Take advantage of the “last deduction standing” for charitable planning

c o n t i n u e d

©2018 Wilmington Trust Corporation and its affiliates. All rights reserved. page 2 of 4

For the first time in over 30 years, we are

faced with sweeping changes to the U.S. tax

code. Although it will take time to digest the

new law and for the Treasury Department

to issue interpretive guidance on many

unanswered questions, the time is now to

start considering how the law may impact

your wealth planning strategy. This is a brief

overview of some of the critical developments

we believe are important to high-net-worth

individuals, families, and business owners.

We frame these developments in the form

of corresponding emerging themes and also

propose actionable potential strategies—

depending on your unique circumstances and

goals—to bring these themes to life. This is

just a first step—one that will inspire many

conversations to help ensure that your wealth

plan keeps pace with these changes.

Tax Reform THREE THEMES

THEME 1 Estate tax planning

Take advantage of the higher estate, gift, and generation-skipping transfer tax (GST) exemption —which was nearly doubled under the new tax law. Increased exemption amounts— even if temporary—create an opportunity to utilize strategies to “lock in” the exemptions and minimize future transfer taxes, even if the higher exemptions expire at some later date. Such strategies may include taking advantage of lifetime gifting opportunities with the extra higher exemption amount and in some cases, it may involve revising an existing estate plan.

STRATEGY: Lifetime gifting opportunities• There are a variety of ways that individuals can utilize this lifetime gifting opportunity. Married couples may consider forming non-reciprocal, spousal lifetime access trusts (SLAT). Individuals interested in potential creditor protection may form and transfer assets to self-settled domestic asset protection trusts (DAPT). The additional exemption may be used to transfer existing life insurance policies to an irrevocable life insurance trust (ILIT). Finally, utilizing a sale to an intentionally defective grantor trust (IDGT) may provide an opportunity to further leverage the additional exemption.

Revisit your existing estate planning if your income tax savings will now outweigh your transfer tax benefits.

STRATEGY: “Turn off” the grantor trust feature • By removing this feature from an existing trust so that it becomes a non-grantor trust, the trust becomes its own taxpayer. With the new higher estate tax exemptions, some of the pressure on estate tax minimization may be relieved. If the trust is administered in a tax-friendly state such as Delaware, it may be possible to turn off payment of state taxes on the trust’s income.

c o n t i n u e d

©2018 Wilmington Trust Corporation and its affiliates. All rights reserved. page 3 of 4

THEME 1 (CONTINUED) STRATEGY: Substitution of trust assets • Irrevocable trusts can be specifically drafted to grant an individual the power to swap assets of the trust with assets that the Grantor holds individually. Low cost basis trust assets can be substituted for high cost basis assets held by the Grantor individually. The low cost basis assets now held by the Grantor would be eligible for a step up in basis upon the Grantor’s death.

THEME 2 Income tax planning

Take advantage of other state jurisdictions to reduce or mitigate your current (or future) state and local income taxation (especially for those in high income tax states). With the ability to utilize State and Local Tax (SALT) deductions significantly reduced and capped at $10,000 per year under the new tax law, income tax mitigation may be more important than ever.

STRATEGY: DING Trusts. • Individuals in high income tax states may consider establishing and funding Delaware incomplete non-grantor (DING) trusts. The Grantor of a DING trust retains ownership of the assets for gift tax purposes while the trust owns the assets for income tax purposes. The DING trust allows the individual taxpayer to shift the income out of his or her home state into a state such as Delaware where the trust may not pay a state income tax.

STRATEGY: Designating a corporate successor trustee. • Some trusts are best administered by an individual during his or her lifetime, such as a revocable living trust or ILIT. However, appointing a corporate successor trustee in a tax-friendly jurisdiction— such as Delaware—can offer professional management of the trust assets at the same time state taxes may be eliminated.

Take advantage of income tax rate disparity. As a result of the reduced corporate tax rate, businesses may find it beneficial to operate in corporate form, especially businesses that do not plan to make current distributions to their equity owners. The relative rate advantage that partnerships had over C corporations has been reduced, and perhaps eliminated, if the deduction for pass-through income is unavailable or is significantly limited.

Tax Reform THREE THEMES

THEME 3 Charitable planning

Take advantage of the “last deduction standing” for charitable planning. While most itemized deductions were eliminated by the new tax law, the charitable contribution deduction was retained, which may assist taxpayers with their income and estate tax planning concerns. An income tax charitable deduction may be afforded to taxpayers for lifetime contributions made directly to charity or through a charitable vehicle, while removing the contributed asset out of the donor’s estate. Also, bequests directly to charity or through a charitable vehicle may afford a deceased individual’s estate an estate tax charitable deduction, potentially reducing the estate tax liability the estate may face.

STRATEGY: Charitable gifting strategies • Charitable Remainder Trusts • Charitable Lead Trusts • Private Family Foundations • Donor Advised Funds

Wilmington Trust has extensive knowledge and experience with complex trust and estate planning techniques, particularly utilizing the Delaware advantage. Please contact your relationship manager to discuss your unique

situation.

page 4 of 4

Tax Reform THREE THEMES

This publication is for informational purposes only and is not intended as an offer or solicitation for the sale of any financial product or service. It is not designed or intended to provide financial, tax, legal, investment, accounting, or other professional advice since such advice always requires consideration of individual circumstances. If professional advice is needed, the services of a professional advisor should be sought.

IRS Circular 230 disclosure: To ensure compliance with requirements imposed by the IRS, we inform you that, while this publication is not intended to provide tax advice, in the event that any information contained in this publication is construed to be tax advice, the information was not intended or written to be used, and cannot be used, for the purpose of (i) avoiding tax related penalties under the Internal Revenue Code or (ii) promoting, marketing, or recommending to another party any matters addressed herein.

Note that a few states, including Delaware, have special trust advantages that may not be available under the laws of your state of residence, including asset protection trusts and directed trusts.

Wilmington Trust is a registered service mark. Wilmington Trust Corporation is a wholly owned subsidiary of M&T Bank Corporation. Wilmington Trust Company, operating in Delaware only, Wilmington Trust, N.A., M&T Bank, and certain other affiliates, provide various fiduciary and non-fiduciary services, including trustee, custodial, agency, investment management, and other services. International corporate and institutional services are offered through Wilmington Trust Corporation’s international affiliates. Loans, credit cards, retail and business deposits, and other business and personal banking services and products are offered by M&T Bank, member FDIC.

Investments: Are NOT FDIC-Insured | Have NO Bank Guarantee | May Lose Value

©2018 Wilmington Trust Corporation and its affiliates. All rights reserved.CS17280 1/2018

How will the tax changes be interpreted

and applied?

It will take time before anyone knows for certain.

Rest assured that we are keeping a close watch and

will update you on important developments. If you

have any questions or concerns, reach out to your

relationship manager.