One of the most significant changes under the current tax laws are the estate-related exemption amounts. The estate tax exemption—or estate tax exclusion as it’s sometimes referred to—is the figure subtracted from an estate’s gross value for the purpose of calculating federal taxes. This means each individual should be able to shelter more than $11 million before any estate, gift, or generation-skipping taxes apply.
Most folks will likely find their old wills and trusts are using strategies tied to the previous, lower exemption figure of about $5.5 million per person. If your current estate plan is left unrevised, it could actually mean you're missing out on certain opportunities for strategic wealth distribution.
Currently, the revised tax laws are set to sunset in 2025. But, luckily, there will be no “clawback” allowed. This means that gifts and transfers made up until then will not be later subjected to taxes if the rate is lowered. So, to take advantage of the current tax framework through estate planning, time is of the essence. Where to start?
Get a plan in place! Don't have an estate plan? Use your tax refund to put one in place! Invest in plan packed with benefits and time/cost-saving measures for you and your family. Start with my estate plan questionnaire.
Review existing documents. You should review your estate plan annually regardless of any legislative changes, but with the revised tax laws, you’ll certainly want to review your will, any trust documents, estate planning goals, and overall tax strategies.
Research the best charitable giving strategies with your estate planner and professional advisors. A great place to start is with GFLF's latest article in The Iowa Lawyer. For the charitable-minded individual, the higher exemption amount represents an opportunity for increased philanthropy. There are different approaches to gift-giving that could be particularly fitting with the tax changes. Or, maybe you simply want to update your charitable bequest quantities and amounts.
A quality estate planner should also help you understand the interplay and differences with state laws pertaining to things like inheritance and estate taxes.
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