The passage of the new tax law is an exciting time for estate planning. We have not had this many changes to the law in over 30 years. The details and implications are still emerging, so a comprehensive analysis of the changes and how they might affect you will take some time.
There is never a bad time to review your estate planning, however. We do know that some people will to have an impact from this new bill and what to look for, so if your situation falls into some broad categories it is important that you have a thorough review of your estate. You may even have a few new provisions which you can take advantage of.
Not as many changes as you might think
While it has received a lot of attention in the press, the rise in the estate tax exemption from the first $5 million in assets to $10 million will not impact many people. If you are one of them, however, there is no question that your entire estate planning is going to change and probably should be dramatically simplified.
The most important changes are in the area of business taxes. If you have a business which is part of your estate, there are certainly ways it will be affected. Any new estate plans for succession in your business will probably come after a thorough analysis of its taxes, however. It will take time to understand all of the implications and make sure you have the best strategy for your situation.
Gift exemptions and GST taxes
One set of changes that certainly affects estate planning are the changes in gift exemptions and generation skipping transfer (GST) taxes. Effective immediate, the gift tax exemption is increased from $10,000 to $15,000. Any transfers of this in one year are now a simple tax-free way of passing on income.
The GST, which only applies when something is handed down to grandchildren, is going to be the same as any other estate tax. This may mean that if you were planning to hand your estate to your grandchildren, but were unwilling to for tax reasons, you may want to look again.
There are also changes in life insurance which may make it more attractive to invest more heavily in irrevocable life insurance trusts (ILITs). You may want to ask your estate planner about this and other life insurance changes which may apply to you.
Despite all of these changes, what is most important is that you have an estate plan which works for your situation. There will be a lot more information in coming weeks on the provisions of this new law. It’s important to have an estate planning law firm with experience to navigate the changes with you and the trust that you need to feel confident that your estate plan is right for you.