The New Tax Law Means It’s Time Review Your Estate Plan

Estate Planning, Wills And Trusts

While the new tax law doubles the federal estate tax exemption, meaning the vast majority of estates will not have to pay any federal estate tax, it doesn’t mean you should ignore its impact on your estate plan.

In December 2017, Republicans in Congress and President Trump doubled the federal estate tax exemption to $11.18 million for individuals and $22.36 million for couples, indexed for inflation. The tax rate for those few estates subject to taxation is 40 percent.

While most estates won’t be subject to the federal estate tax, you should review your estate plan to make sure the changes won’t have other negative consequences or to see if there is a better way to pass on your assets. For example, one common estate planning technique when the estate tax exemption was smaller was to leave everything that could pass free of the estate tax to the decedent’s children and the rest to the spouse. If you still have that provision in your will, your kids could inherit your entire estate while your spouse would be disinherited.

For example, as recently as 2001 the federal estate tax exemption was a mere $675,000. Someone with, say, an $800,000 estate who hasn’t changed their estate plan since then could see the entire estate go to their children and none to their spouse.

Another consideration is how the new tax law might affect capital gains taxes. When someone inherits property, such as a house or stocks, the property is usually worth more than it was when the original owner purchased it. If the beneficiary were to sell the property, there could be huge capital gains taxes. Fortunately, when someone inherits property, the property’s tax basis is “stepped up,” which means the tax basis would be the current value of the property. If the same property is gifted, there is no “step up” in basis, so the gift recipient would have to pay capital gains taxes. Previously, in order to avoid the estate tax you might have given property to your children or to a trust, even though there would be capital gains consequences. Now, it might be better for your beneficiaries to inherit the property.

Come visit me to review your Estate Plan anytime.

Share:

Share on facebook
Share on twitter
Share on linkedin

More Posts

Vaccine for Snowbirds

Snowbirds to get Florida Covid Vaccine

When it comes to the vaccine for COVID-19, snowbirds are equal to the rest of us.

Senior visitors spending the winter in Florida, (including some just entering the state looking for the vaccine?) along with seniors who live in the state full-time and those with medical conditions, can get the vaccine here.

How to Celebrate Holidays with Seniors 2020

Although we really want a big family celebration where we can all celebrate the holidays together, that might not be the best idea right now. Many families are understandably trying to find other ways to be able to connect with our silver-aged loved ones during the holidays.

End of Year Taxes and Charitable Donation

As part of the Coronavirus Aid, Relief and Economic Security (CARES) Act, Congress created a one-time $300 charitable deduction for people who do not itemize on their tax returns. To qualify, you must give cash (including paying by check or credit card) to a 501(c)(3) charity. G

Jakob Legal helps a senior couple with Health Care Directives sitting together on plaid at sandy beach.

Its Medicare Advantage Season

Now is the annual opportunity to change medicare coverage. From Oct. 15 until Dec. 7, enrollees can shop Medicare’s marketplace for the prescription drug and Advantage plans offered by commercial insurance companies. They can also switch between fee-for-service original Medicare and Advantage.
And they will have plenty of choices: Next year, the typical Medicare enrollee will be able to choose from 57 Medicare prescription or Advantage plans that include drug coverage, according to the Kaiser Family Foundation.

Please Contact Me

Skip to content