Ask the Estate Planning Attorney Bergen County, NJ: The Tax Cut and Jobs Act and My Estate Plan, Part II

In our last post in this series, we shone the spotlight on the Tax Cut and Jobs Act, known as the TCJA, and how it affects estate plans with respect to gift and estate tax exemptions and generation-skipping transfer taxes. This post will examine how the TCJA will impact retirement planning by reviewing the changes to Roth conversions, 529 savings plans, and the elimination of the individual mandate provision of the Affordable Health Care Act.                                            

 Before we get started on the discussion for today’s topic, a disclaimer. The Giro Law Firm does not provide tax, legal, or accounting advice. This material has been prepared for informational purposes only and is not intended to provide, and should not be relied on for, tax, legal, or accounting advice. You should consult your own tax, legal, and accounting advisors before engaging in any transaction. You can also call us at (201) 690-1642 or request an appointment online to schedule a review of your current estate plan or create a new one.

Roth IRA Conversion

When individuals convert from a traditional IRA to a Roth IRA, a back-door is created and the individual pays income tax on the contributions. The taxable amount is then converted and added to an individual’s income taxes and the individual’s income tax rate is applied to his or her total income.

Beginning on January 1, 2018, the TCJA no longer allows taxpayers who convert a pretax traditional IRA into a post-tax Roth IRA from later reversing the conversion, a process known as “recharacterization.” Recharacterization is still an option for other contributions. Ask an estate planning attorney Bergen County, NJ today about recharacterizations of other contributions.

529 Savings Plan

In a significant move beginning on January 1, 2018, the definition of a qualified education expense was expanded to include primary and secondary school expenses. Previously, 529 savings plans could only be used for postsecondary, or college and beyond, level school expenses, including tuition, room and board, and fees.

Elimination of Individual Mandate Under the Affordable Care Act (ACA)

Beginning on January 1, 2019, the TCJA eliminated the individual mandate under the Affordable Care Act requiring taxpayers not covered by a qualifying health plan to pay a penalty.

Modify Your Estate Plan to Consider Changes to the Tax Code

A periodic review of your estate plan is recommended annually. This year it is important because of the changes to the gift and estate tax exemption, the generation-skipping transfer tax, Roth conversion, and 529 savings plan modifications. Ask an estate planning attorney in Bergen County, NJ today about an estate plan, including trusts, to minimize the tax consequence of gifts and transfers. Our estate planning attorney in Bergen County, NJ helps families with Medicaid planning, special needs, probate, veteran’s aid, and family law needs. To request a consultation, click here or call (201) 690-1642 today.