If you are like many Americans, you know estate planning is important, but you just haven’t gotten around to it yet. Or if you have an estate plan, once it was completed, you probably crossed it off your to-do list forever. Not so fast. You may be curious about how the new tax law effects estate planning. Changes in the new federal tax laws present some unique opportunities in estate planning and make updates to existing plans far more urgent.
The tax reform legislation that passed through Congress at the close of 2017 significantly impacts individual and business taxes, and presents several opportunities to implement new estate planning strategies. Techniques such as rethinking the use of trusts to provide asset protection and immediate tax savings, implementing strategies to address the new $10,000 annual limit on state and local income tax property deductions, and creating methods to provide creditor protection should all be explored with a professional estate planner.
The new federal tax law nearly doubled the federal estate tax exemption to $11.2 million per person – indexed for inflation – for tax years 2018 through 2025. This dramatic increase in the exemption level presents an extraordinary opportunity to realize tax savings: no estate taxes are due for estates valued at $11.2 million or less and if an estate’s gross value exceeds this amount, only the amount over the exemption level is taxed. But good things don’t last forever -- this higher exemption level sunsets in 2026 when the exemption level returns to $5 million per person, adjusted for inflation. The tax law could, in fact, be changed prior to that so don’t delay in taking advantage of this tremendous opportunity.
Estate plans should be updated whenever there is a life change, such as marriage, divorce, or the birth of children. They also should be reviewed when laws change and the recent change in the tax laws warrants an immediate review of your estate plan. Existing trusts and last will and testaments that utilize formulas tied to old federal estate tax exemption levels can now have unintended consequences, including unintentionally disinheriting a loved one.
The use of new types of trusts, with different tax profiles will require that financial planners reconsider asset location decisions.
Overall, estate planning has been completely transformed by the new law. While a properly crafted estate plan can and should still achieve asset protection, asset disposition and other goals, it can also now be directed at achieving a range of valuable income tax planning benefits.
Can You Take Advantage of New Estate Planning Opportunities? Give Us a Call!
The new federal tax laws present opportunities for estate planning techniques that save on income tax, provide asset protection and maximize investments. Let us help you best prepare for your financial future. Altman & Associates is recognized as the premier estate planning law firm in the Washington Metropolitan area, with convenient office locations in Columbia, Rockville, D.C. and Northern Virginia. To arrange a confidential consultation to answer your estate planning questions and discuss your needs, contact us at 301-468-3220 or online.