How might the new federal tax law impact my estate plan?
The new tax bill went into effect on January 1, 2018. Several major tax provisions will change under the tax reform bill and these alterations will have an impact on the field of estate planning as well as personal taxes. Now is the time to review your estate plan, if you currently have one, to ensure it still meets all of your needs under the new law. If you do not yet have an estate plan, take action now to protect your loved ones in the event of your death.
Raising the Estate Tax Exemption
Under the new tax bill, the already high estate tax exemption has been raised even further. The estate tax exemption is now set to $11 million for an individual and $22 million for a married couple that elects portability. Married couples must ensure their estate plan invokes portability by using the right language, otherwise they may not benefit from the high estate tax exemption.
With the estate tax exemption now set so high, only the ultra-wealthy are at risk of imposition of the federal estate tax. Those living in certain states, including New Jersey and Connecticut, could still face a state estate or inheritance tax. State exemption limits are typically tied to federal law, so states could see these values rising soon as well.
It remains critical for those with large estates to create a thorough estate plan that will prevent the estate from being subjected to the estate tax. Your estate planning lawyer can protect your estate from the estate tax through the use of gifting and trusts. Trusts remain the main way in which you can pass your assets to your heirs without fear of tax consequences.
Estate planning remains of vital importance even for those in no danger of the estate tax. A thorough estate plan is the only way to pass your business to your heirs without creating a taxable event. Without an estate plan in place, the reality is that you will have no control over what happens to your hard earned assets and your family’s finances. Take charge today by creating or reviewing your estate plan.