Laws seem to change frequently. Sometimes there’s so little fanfare, we don’t know what hit us when the law finally affects us. Tax reform, while we did see it on the news a lot, may still be somewhat of a mystery to most of us. However, even your estate plan may be affected by tax reform. It’s important to take a few minutes to see how tax reform will affect your estate plan and how you should adapt.
Here’s what Your Estate Plan is Supposed to Do:
An estate plan is deals with the estate owner’s incapacity and death. One goal is to leave as many assets to your heirs, with the transfer being handled in the most expedient and cost-efficient way.
Tax Reform May Change the Direction of Your Plan.
A lot depends on the value of your estate. Many use estate planning strategies to retain as much value as possible, including tax-saving strategies.
The current tax reform doubles the exemption amount for estate, gift, and generation-skipping taxes from about $5 million to over $10 million per person. That means that your estate will need to be more than the exemption amount for the federal estate tax to kick in. The new exemption affects estates where the decedent dies after December 31, 2017.
- If your estate is currently valued anywhere near the exemption limit, it’s time to take a hard look at your estate plan. Does it fit with the current tax climate? With the federal estate tax
- If your estate plan is less than the exemption amount, it’s still a good time to speak with an attorney about estate taxes. The change in estate tax exemption expires on December 31, 2025. Between now and then, the value of your estate may flirt with or exceed the exemption limit. Your life circumstances could change. Keep those plans up to date!
One thing to keep in mind is that your estate will be held to the tax law in effect at the time of your death. Don’t think that just because your estate doesn’t meet the exemption limit now, that you never have to review your plans again.
Estate plans that involve gifting or generation-skipping transfer are also affected by the new tax law. In addition, plans including “formula dispositions” must be reviewed to make sure they are still effective.
Finally, federal tax reform may trigger changes to state estate and inheritances taxes. If you live in a state that still collects estate or inheritance taxes, consult with an attorney or tax professional to make sure your plans are still workable.
Concerned About the Direction of Your Plan?
If you’re uncertain about how the new tax rules will affect your estate planning, call for a consultation.
At Dillon Law Group, PLC, your estate is in good hands. Our attorneys work with you to make thoughtful decisions about your future. Give us a call at 757-962-4796 or use our convenient Contact Form. We assist clients in the Virginia Beach and Newport News areas.