The tax laws may change your estate planning strategy.
Taxes impact financial decisions.
When tax laws change, you often need to reevaluate your goals and strategies.
According to a recent Forbes article titled “Trusts In The Age Of Trump: Time To Re-Engineer Your Estate Plan,” this includes your estate planning.
The federal tax laws now allow for a higher federal estate tax exemption.
What is it?
The exemption is now just north of $11 million per individual when passed to children or non-charitable heirs.
This means the assets will pass without estate or federal gift taxes.
If you are married you could combine your exemptions and transfer just north of $22 million free of federal estate taxes.
By transferring the assets into a dynasty trust, your wealth could grow and pass to unlimited generations in the future without being subject to estate taxes.
If your state has an estate tax or inheritance tax below the federal threshold, you will need to consider this in your planning.
Otherwise, you could owe your state government a sizeable bill.
You will want to avoid leaving a trust with the exemption amount to children and the rest to your spouse.
This could disinherit your wife and allow your children to receive everything.
The new tax laws now allow for "portability" of the federal estate tax exemption between spouses.
What does this mean?
This means that whatever exemption amount unused by the first spouse to die will pass to the widow or widower.
However, this is not automatic.
The executor must file a tax return electing portability for this to happen.
Are you concerned about capital gains taxes?
If yes, then you may want to skip using a traditional credit shelter trust with assets like collectibles, stocks, mutual funds or real estate.
When you die, these assets will receive a step-up in basis at your passing to their current value.
This means heirs can sell these inherited assets immediately and would not owe a capital gains tax.
If you leave these assets directly to your spouse, he or she can receive a step-up in basis at your death and the assets will get another step-up when he or she dies.
If you leave them through a shelter trust, the assets will only receive a step-up in basis at your passing.
Trusts are complex estate planning tools.
They have their purposes, but you want to be sure the possible purposes fit your needs.
Work with an experienced estate planning attorney to create or revisit your plan to meet your goals.
Remember: “An ounce of prevention is worth a pound of cure.” When making your financial, tax and estate plans, do not go it alone. Be sure to engage competent professional counsel.
For more information about estate planning in Overland Park, KS (and throughout the rest of Kansas and Missouri), visit our estate planning website and be sure to subscribe to our complimentary estate planning e-newsletter while you are there.
Reference: Forbes (February 13, 2018) “Trusts In The Age Of Trump: Time To Re-Engineer Your Estate Plan”