Tips for Preparing for an Estate Tax Change


Are you worried about the possibility of a change in your federal estate tax? If so, now may not be the time to panic, but it may be the time to plan. There are several steps you can take to be prepared and plan for a change that may negatively impact your estate, while helping to ensure you do not get ahead of yourself and rush to make estate planning changes that may not end up being necessary. Let us go over some tips to prepare, depending on where you are in your estate planning journey.

If you are in your 30s or 40s and you have done well financially, you may be starting to plan out what you would like to leave to your children. If you are concerned about future estate tax changes, the best thing you can do may be to speak to your tax advisor and estate planning attorney. Tell them you would like to create estate planning structures that can change alongside any estate tax changes that come now or in the future to give your estate the best possible outcome and leave the most you can to your heirs. While current proposals on the table may mean estate tax rates increase and the federal estate tax exemption decreases, many things remain up in the air right now. Things may be different when it matters for your needs, and you will likely want the flexibility to make changes.

If you are focused on getting an estate plan set in place, you may want to use a mix of strategies that take into account the potential for future estate tax changes. If you have any assets that could be sold now or later, and the capital gains tax is poised for an increase, you might decide to sell now. If, however, you are not in a hurry to sell, there may be no reason to just yet. You may still have time, and capital gains tax rates could rise and fall a few times more.

If you are nearing the end of life, proposed estate tax changes may impact your estate if passed, given the time frame. Take a careful look at any changes to the federal estate tax exclusion. If your estate size falls below the current limits but above the proposed new limits, you might consider a gifting strategy right now to remove some of the overage from your estate. You might also consider setting up an irrevocable trust to remove assets from your taxable estate.

For more strategies on how to prepare for an estate tax change, please contact our office to schedule a meeting.