It’s important to keep our estate plans current. Experiencing a major life event, like a birth or death, may affect some or all of your estate planning documents. When laws change, your plans may need some attention also. The tax reform that became law in December 2017 will probably affect your income tax strategies. Deductions you once counted on may have been eliminated, decreased, or increased. It also affects your estate planning. People with high-value estates now have $11 million reasons to review their estate planning.
Prior tax law allowed approximately $5.6 million of an estate to be exempt from estate taxes. That meant that, considering all aspects of your estate, no tax was due unless your estate exceeded the exemption limit.
Now, due to the 2017 tax reform, the estate tax exemption limit has been doubled to:
$11.2 million for a single person; and
$22.4 million for a married couple.
It may not seem like a big deal. After all, most of us will not have estates that exceed $11.2 million.
However, some components of your estate plan may have been put in place primarily to reduce your estate’s tax burden. Are strategies that aim to reduce the estate tax burden still appropriate for your eventual estate?
And there is a risk that the estate tax exemption may change again in 2025, when current tax reform expires.
Trusts that were set up for the primary purpose of tax reduction should be reviewed. Any trusts established prior to 2017 may no longer be the best option for you. However, this may be a prime time to consider setting up a dynasty trust.
Gifting has been a popular tax reduction tool. The increased estate tax exemption affects gifting also. It may be advantageous to increase your annual gifting, especially because the limits may change in 2026.
Any strategy used in the past to reduce estate tax should be considered up for review.
Due to the extensive tax reform, your estate plan may need attention. Documents may need to be altered, but with an eye toward future changes in tax law.
Attorney John Mangan is board certified in Wills, Trusts & Estates by the Florida Bar. Please call us at 772-324-9050 or use our Contact Form to set up an appointment. We help clients throughout Florida, including Stuart, Palm City, Hobe Sound, Jupiter, and Port St. Lucie.