This Is No Time To Relax!

The Tax Cuts and Jobs Act of 2017 doubled the estate tax exemption. Will clients keep calling? Indeed, there’s a host of reasons they should.

First and foremost, taxes should not be the central planning point for estate and trust clients. Estate planning’s primary goal is to protect assets from creditors, divorcing spouses, and mismanagement by beneficiaries themselves who are young, undisciplined or unsavvy. Losses from these risks far outweigh estate tax concerns.

The next thing to know is that the increased exemption is set to expire in 2025. So, it’s very possible we will return to current law – and there’s no assurance that future administrations won’t reduce the exemption even further. Therefore, many current planning approaches are still prudent. For example, filing the federal estate tax return to obtain portability of the decedent spouse’s unused election is still strongly advised.

Third, most estate plans should be revised to secure income tax benefits. For example, estate tax motivated trusts grant special powers of appointment to keep trust assets out of the beneficiary’s estate. But that shatters the benefit of stepped-up tax basis. Depending on total estate value and non-tax considerations, like creditor protection, many clients will now want to update their trusts with general powers of appointment and tax-basis adjustment distribution provisions.

If you have questions about the impact of new tax laws on your estate, Perlick Legal Counsel is here to help. Contact us now to see if your estate plan is running smoothly, or perhaps needs a tune-up.