New Year, New Approach to Estate Planning

One of the biggest stories of 2017 is the new legislation that passed in December that drastically changed the government’s tax code. With such sweeping new changes, it is more important than ever to make sure that your estate plan is as comprehensive as possible and still addresses your need effectively. Some of the major changes many individuals with existing estate plans need to worry about are discussed below.

Estate Tax

One aspect of the bill that has a significant impact on estate planning approaches and portfolios is how the estate tax was handled. In essence, the estate tax threshold has doubled. In the past, the exemption hovered around five million dollars for individuals and roughly double that for couples. Now, the exemption has been increased to nearly eleven million dollars for an individual and double that for a couple. As in the past, the exemption threshold is tied to inflation and will continue to increase each year.

Individuals with estate values below the threshold are not liable for the estate tax. That means some of the existing plans you have in place – including trusts and other mechanisms of your estate plan that were designed to reduce the overall value of your taxable estate – may no longer be necessary or may need to be significantly adapted to account for such drastic changes in the law. An experienced estate planning attorney can work with you to review the design of your estate plan and provide information about how the new tax code affects your strategy.

It is important to approach any changes with the help of an experienced estate planning attorney. These changes are set to expire in 2025, and absent additional action by Congress that means that making certain changes could still be premature. However, reviewing your estate plan with the new estate tax threshold in mind can help you gain some insight about the direction you may want your estate plan to go in.

Gift Tax

Individuals that have an extensive estate may want to consider making use of the gift tax exemption. Doing this as early as possible can be an effective way to distribute assets to individual beneficiaries while also reducing your estate over time. This can be an especially helpful strategy for individuals concerned about how the law’s potential 2025 sunset and reversion to last year’s exemption schedule might impact them.

Tax Savings

Many people do not need to worry about the estate tax exemption whether at its new level or when it reverts. However, that does not mean the tax changes cannot benefit their approach to estate planning. If you find yourself with tax savings, there are a variety of estate planning strategies you can employ using those tax savings to ensure that your loved ones are adequately provided for. An estate planning attorney can help you explore those options.

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