When Congress enacted tax reform in 2017, the new tax law permanently lowered the tax rate for corporations from 35% to 21%. To make sure that other business owners weren’t left behind, Congress provided a new deduction—Section 199A—for sole proprietors and owners of pass-through businesses. Section 199A offers eligible business owners a lower effective tax rate  by allowing for a deduction of up to 20% on qualified business income (QBI) for tax years 2018 - 2025. Due to a lack of initial guidance, there has been much difficulty and speculation regarding how this deduction works.

When planning for the future, each of us would prefer to retain some semblance of power over the assets we leave to our loved ones. But how do we help our clients control how things are divvied up or used after their deaths? One answer is to include a power of appointment in their planning documents.

Power of Appointments, Generally

A power of appointment is simply a way for the client (the “Donor”) to designate a particular someone (the “Donee”) to direct the client’s assets (the “appointive property”) to the people or entities (the “Appointees”) that the client has selected; in the ways that they have instituted; by means that they have espoused. Further, it is also a way to provide a trusted Donee with the power to select Appointees of their own choosing. A power of appointment may be created as a present power or as a conditional power.

Article originally published in the Quarterly V12-I2, 2018. Author: Patrick Carlson, JD, LLM. Get all your business and estate planning information by becoming a Quarterly subscriber.

Sadly, many attorneys do not approach their client development efforts with an eye towards creating lifetime value. When you transition your mindset, it can have far-reaching – and valuable – implications for how to approach your marketing efforts, initial intake, client service, and the cultivation of additional legal service opportunities with those clients.