Estate plans are rarely “one and done.” They need a little maintenance to keep them healthy over time. Anytime there’s a major overhaul of the tax code is a good time to review your estate plan and see what might have changed for you and your heirs.
Based on the most recent tax changes, here are some things that you should know:
1. The new laws have eliminated the estate tax for many high-asset families. The upper ceiling for meeting the exemption for estate tax was previously $5.6 million. That has been doubled to $11.2 million.
This may also affect your state estate tax — in some states, that’s tied to the federal limits.
Either way, if you were previously subject to the federal estate tax, you may have good reason to celebrate — and make some additional provisions in your will.
2. Spouses need to include the right language in their wills to invoke portability.
If you’re wanting your spouse to avoid any estate tax on whatever he or she inherits if you die first (and vice versa) make sure that your estate plans use the right language — otherwise, you may have to put the money through a trust in order to avoid taxation.
3. You can make use of the new exemptions to make additional lifetime gifts.
This is particularly important if you’re expecting to live past 2026 (absent unforeseen circumstances). That’s when the new exemption levels expire and the maximum reverts back to pre-2018 levels.
It’s also important, however, to keep in mind that you need to plan lifetime gifts well in advance of your declining health. Should you eventually require long-term care benefits from Medicaid or Medicare, you can run afoul of rules that penalize you for gifts made in the previous five years before you file for those benefits.
If you haven’t looked closely into the new tax laws, you can bet that the professionals handling your estate planning certainly have. Consider having a full review and a frank discussion about your future options under the new laws soon.
Source: Chron, “Elder Law: Death, taxes and changes in the new tax act,” Wesley E Wright and Molly Dear Abshire, Feb. 12, 2018