In our previous blog post on the 2025 Heckerling Institute on Estate Planning, we highlighted the concept of purpose trusts, a conference topic involving unique planning and charitable opportunities. In this second post of our two-part series, we share some of the conference’s relevant takeaways for high-net-worth clients and family offices and other “hot topics” in wealth planning.
1. Expiring Tax Cuts and Jobs Act (TCJA) Provisions
In 2018, the TCJA made significant changes to tax legislation that impacted individuals, families, business owners and companies. Some changes were intended to be permanent, but others will expire on Dec. 31, 2025, unless Congress acts to extend them.
Some of the expiring provisions that could negatively impact individual taxpayers include:
- Increase in marginal income tax rates. Specifically, the top six brackets will be subject to higher marginal tax.
- Lower standard deduction, as the deduction through 2025 was doubled from pre-2018.
- Decrease in charitable cash contribution deduction.
- Itemized deduction cap returns for taxpayers with income over a certain threshold.
- Significant drop on estate, gift and generation-skipping transfer tax exemption amounts.
Some expiring provisions that could negatively impact business owners include:
- Section 199A deduction for pass-through business income will disappear.
- Bonus depreciation on qualified property sunsets in 2026.
- Employers will lose tax credit for wages paid to employees on family and medical leave.
On the other hand, expiring provisions could result in welcoming back tax benefits, including:
- Miscellaneous itemized deductions.
- Personal exemptions for taxpayers and their dependents.
- Deductions for interest paid on home equity debt.
- No cap on state and local tax (SALT) deduction, which the TCJA currently caps at $10,000 for single and joint filers who itemize their income tax deductions.
The takeaway: Given the current uncertainty about which, if any, of the TCJA provisions will be extended in the future, it is crucial to understand and prepare for what could lie ahead. See our previous blog post here for more information on preparing for expiring TCJA provisions.
2. Protecting Your Estate Plan
We often talk about the permanence of irrevocable trusts as they relate to estate planning wishes after death. Nonetheless, there are several techniques that may be used to override the intentions of the creator of the plan, including litigation, trust decanting, trust protector powers and non-judicial settlement agreements. If the goal is to purposefully not build in flexibility for a plan, then there are several concepts that should be considered when drafting a trust or estate plan.
Some states allow for the enforcement of a “no contest” or “in terrorem” clause. This type of clause found within a will or trust causes a beneficiary who brings a challenge against the planning instrument to lose their beneficial interest. Availability of these clauses vary amongst states; for example, Michigan allows enforcement of such provisions, but Florida does not.
Further, the creator of a trust or will could include any, or none of, the following:
- Requiring mandatory arbitration in case of a dispute.
- Prohibiting a trustee from “decanting” the trust assets to a new trust to change the terms or beneficiaries of an original trust.
- Preventing the statutory virtual representation rules from being used to modify a trust or estate plan.
- Opting out of the use of non-judicial settlement agreements to modify a trust.
The takeaway: Often the goal is to build flexibility into an estate plan or trust to accommodate unanticipated circumstances or changes in the law. However, sometimes, building in flexibility can result in a future invalidation of the decedent’s or trust creator’s intentions and goals. Be sure to discuss with your attorney ways to more fully protect your intentions.
3. Life Insurance Proceeds Owned by and Payable to a Company – Are These Included in the Value of Stock in a Shareholder’s Estate?
We discussed this question last year, noting that a case on this issue, Connelly v. United States, was headed to the U.S. Supreme Court in 2024 for a decisive answer.
In Connelly, the Supreme Court ultimately held that the value of life insurance proceeds used to redeem the shares of a deceased shareholder must be included when calculating the value of those shares for the purposes of the deceased shareholder’s federal estate tax. Specifically, the court did not believe that the contractual redemption obligation under the buy-sell agreement in this case constituted a liability that would offset the insurance proceeds received as a result of a deceased shareholder.
The takeaway: Owners of closely held companies should reach out to their attorneys to review the tax implications of current buy-sell agreements supported by life insurance and discuss whether to restructure life insurance policies held on the lives of company owners. See our article here for more information.
