What Recent Estate Tax Law Changes Should I Know About?

New tax laws could impact your estate planning.

Tax laws seem to be constantly changing.

Although constant may not be the most accurate word, tax laws do change frequently.

The tax law signed in December of 2017 made several changes.

Big ones.

According to a recent The Kansas City Star article titled “Talk to estate attorney about impacts of Tax Cuts and Jobs Act,” if you have not looked at your estate plan in more than a year, you should do so now.

What changed with the Tax Cuts and Jobs Act?

The federal estate tax exemption more than doubled from $5.49 million for an individual in 2017 to $11.18 million per person in 2018.

For 2019, the exemption will is $11.4 million for an individual and $22.8 million for a couple.

Oftentimes, wills and trusts will use "formulas" tied to the federal estate tax exemption.

If this was the case for your will or trust, you will want to revisit them with your attorney to ensure you do not trigger unintended tax and non-tax consequences.

Although the most recent law did not change the step-up of basis, the impact this has on estate planning may be more pronounces.

How so?

With a step-up on highly appreciated assets, your loved ones could inherit such assets while minimizing or avoiding income taxes for these gifts.

A step-up in basis will not apply for all inheritances.

Why is that?

For example, assets received through a "bypass" trust (aka a "credit shelter" trust) after the surviving spouse dies will not receive a step-up in basis as this was applied after the death of the first spouse.

If your estate plan originally included a bypass trust, you should contact an experienced estate planning attorney to consider implementing a more tax-efficient tool.

Was the last time you reviewed your trust prior to 2011?

If yes, you will want to have a "full physical exam" of your estate plan.

In 2011 "portability" was introduced allowing the surviving spouse to utilize the estate tax exemption not used in the estate of the first spouse to pass.

Regardless, be mindful of potential non-tax surprises created by a move to portability planning.

This is especially true if yours is a "blended" family.

You could end up disinheriting your own children.

Schedule an appointment with an experienced estate planning attorney to review and updated your estate plan to align with recent tax changes.

Reference: Kansas City Star (February 7, 2019) “Talk to estate attorney about impacts of Tax Cuts and Jobs Act”