Learn Why the New Federal Estate Tax Exemption Doesn’t Give You an Estate Planning “Pass”

Unless you were living under a rock, you most likely heard about the tax reform bill that was passed through Congress and signed by the President over the holidays. One big change that came out of it was the doubling of the exemption amount for federal estate, gift and generation-skipping transfer taxes.

Beginning in 2018, the exemption for federal estate, gift and generation-skipping taxes effectively increased after an inflation adjustment to $11.2 million, or $22.4 million for a married couple. This means that you can pass down a total of $11.2 million (or $22.4 million if you’re married) to heirs without incurring any federal estate taxes.

If planning to minimize or avoid estate taxes was your primary concern, you may be thinking that you can now neglect planning in light of these legislative changes. But, that would be a mistake.

As I’ve mentioned many, many times, estate planning is about much more than avoiding taxes. Estate planning will ensure that your financial and medical wishes are followed if you become incapacitated or pass away. Estate planning further allows you to direct how your assets are divided and to whom they should pass to. Also, if you have minor children, you can select who you want to care for them if you die, rather than a judge who doesn’t know you or your family.

What is critically important now more than ever is, if you are married and have an older plan in place (pre-2011) then you definitely need to have your plan reviewed and updated. There are old tax provisions in many trusts that are no longer necessary and can cause unnecessary complications and negative tax consequences.

Also, the new estate tax exemption only lasts until 2025; after that the exemption reverts back to the $5 million base. Further, the next presidential election could roll it back even more. If you have accumulated sufficient wealth, you should consider making substantial gifts before the sunset provision– or earlier depending on the next election cycle.

So, rather than lessening the need to plan, there are plenty of important issues that require an experienced estate planning attorney who understands how to protect inherited assets, as well as making sure that you do not leave a lot of money to a beneficiary who is not prepared to handle it properly.

The doubling of the estate exemption was historic. The important thing to remember is that the pendulum can easily swing the other way and it is critical that you are prepared.  Rather than live with uncertainty, contact us to discuss how to best plan for your peace of mind, both now and in the future. If you would like to attend one of our upcoming talks go to www.OCPlanningSeminar.com   or call our Orange County estate planning law firm at (949) 260-1400 for more information.

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