Tips on How to Prepare Your Estate for Proposed Tax Law Changes


Estate planning, and the nuances surrounding passing your generational wealth to your family, continues to be at the forefront of our minds in our practice. Each day, we are inundated with news alerting us to the fact that the tax benefits that most Americans have benefited from for the past several years are under threat of being eliminated. While many of the current incentives and benefits stemmed from the Tax Cut and Jobs Act of 2017, whose laws were to sunset in 2025, with the changes currently in front of Congress we may see proposed tax changes implemented as soon as 2022.

One of the main focuses of the Congressional effort to raise money for a $3.5 trillion-dollar spending plan is to raise the taxes paid by the most affluent Americans. This is not specifically addressing the billion-dollar families, but the families that have accumulated money in the million-dollar range. Much of this planning by Congress is designed for both tax appreciated wealth and larger inheritances. The impact to your Florida estate planning could be significant and, as a result, you need to make sure that you are carefully monitoring the strategies you need to implement to preserve as much of your financial legacy as possible.

Shortening the time frame of the implementation of existing tax laws gives Floridians a limited amount of time to update their estate planning. Let us share three tips on how to prepare your estate for these proposed tax law changes.

1. Work with an experienced Florida estate planning attorney. Now is not the time to cut corners or to think you can do this yourself. Congress has made its intentions clear. It will raise money, if it is allowed to do so, through taxing generational wealth and formerly exempt transfers to your intended beneficiaries. You need to work with an attorney who is not only skilled in navigating these challenges but who is dedicated to staying abreast of them and can implement the legal protections you need.

2. Understand the changes that may be coming and if they will impact you. Florida does not have a death tax. As a result, it is often viewed as a safe haven for retirees and business owners to move to and protect their personal net worth. Floridians are, however, still subject to federal estate and gift tax rules. Right now, if the Congressional proposal succeeds and the TCJA’s estate tax exemption expires early, before 2025, it would lower the current exemption from $11.7 million to somewhere in the $5 million range for individual taxpayers.

3. Learn the complex estate planning strategies that may be removed. If you have an estate plan in place, then your estate planning attorney has most likely already worked with you to implement the strategies that can give you the most favorable tax consequences possible, both in Florida and federally. Right now, the House Democrats have proposed to limit or remove several of the most popular estate planning techniques that have been used by affluent people for decades to protect their families. This includes the use of grantor trusts and transfers with specific, discounted value structures. Further, President Biden’s proposed plan could impose a capital gains tax on appreciated estate assets.

As we watch Congress move closer to a decision each day, now is the time to update your existing Florida estate plan under the guidance of an experienced attorney. If you do not have a Florida estate plan right now, time is of the essence. We encourage you to contact our office today and schedule an appointment with one of our experienced Florida estate planning attorneys.

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