CPAs' evolving role as estate planners.

• Author: Shenkman, Martin M.
• Position: Certified public accountants

The estate planning tax sea change created by the American Taxpayer Relief Act of 2012 (ATRA), P.L. 112-240, is old news by now. Every practitioner is well-familiar with the inflation-adjusted $5 million estate tax exemption ($5.43 million in 2015), permanent portability, and the higher income tax rates ATRA enacted. Practitioners have also been grappling with the complexity of the 3.8% net investment income tax that became effective in 2013.

But understanding the tax changes alone does not prepare practitioners for how dramatically their role in the estate planning process has changed. Nor does evaluating just the tax changes reveal how dramatically other factors, such as demographics and changing client perceptions, will revolutionize the CPA's role in the estate planning process for years to come.

Forms 706

The number of Forms 706, United States Estate (and Generation-Skipping Transfer.) Tax Return, filed has declined dramatically over the past several years: 108,000 were filed in 2001, but fewer than 10,000 were filed in 2012. As the exemption has grown, and will continue to do so because of adjustments for inflation, taxable returns have declined precipitously.

In the past, a significant portion of estate tax returns were prepared by law firms handling probate cases. But there is more to the analysis than merely counting the declining number of returns and taxable estates. Now that portability is permanent, it is prudent for a larger number of estates to file an estate tax return to secure for a surviving spouse any unused exemption of the first spouse to die. This remains advisable even if the estate appears lower than what the exemption may cover. The surviving spouse may receive an inheritance or remarry someone wealthier. The most significant consideration is that, even though Congress has labeled the exemption amount "permanent," there is no guarantee that the exemption will not be reduced in the future. Clients should not sacrifice a potentially valuable portable exemption in light of these risks.

This should translate into a larger number of estate tax returns being filed each year than have historically been filed. The new returns will be prepared not because a tax is due, but merely to elect portability to preserve the unused exemption of the first spouse to die. These portability returns will be quite different because clients are not concerned about a tax due--in fact, most filers anticipate a tax will never be due--and are unlikely to be willing to incur significant fees merely to secure portability. This should cause a significant migration of this return preparation service from law firms to CPA firms. In most cases, the sheer number of tax returns CPA firms prepare compared with law firms will permit greater efficiencies and lower costs. The estimates that the Treasury regulations permit for valuations on...