We had some remarkable changes in the tax laws at the beginning of 2018. Most still don’t completely understand how it will affect different people but we all know it will affect us all in some way…good or bad. Unfortunately, this will also have an impact on your estate plan because of these changes. Even if nothing else changed in your life during 2018, the changes in the tax law are enough for me to recommend to everyone that they need to revisit their Estate Plan.
As you are still coming to terms with the impact of the new tax laws, it’s a great time to schedule a review meeting with your attorney. If you have not already reviewed your estate plan with your estate planning attorney, you still have time to review it and make necessary changes. Many of the provisions have gone into effect in 2018 and will end in 2026. Unless you can predict with great accuracy when you will pass, you need to update your estate plan, according to Reuter’s article “Your estate plan needs an update even if it is new.”
One of the key areas is the exemption for federal tax. Even though the exemption for the federal estate tax has doubled to $22 million for couples, one of the important parts of estate planning has to do with your financial well-being while you are alive. For example, your power of attorney forms and healthcare proxies should be reviewed for when you are unable to make decisions on your own. These are critically important areas to make sure are on track with your wishes.
Another area that is often missed is with regard to your beneficiary designations. You should make sure that your beneficiary designations are up-to-date, especially on life insurance policies and 401(k)s from previous employers.
One of the primary focuses of estate planning is keeping control over your assets, even after you die. You might want your responsible younger daughter to be in charge of your estate and not your older son who might be at a challenging time in his life. You may also want to skip a generation and ensure that your wealth passes to grandchildren and not your children because of how well they may be doing in life without acquiring your wealth and assets.
If your family has an individual with a special need you’ll want to make sure you have made provisions for their future with a Special Needs Trust (SNT). This is very specific to their needs and will allow them to get the care they need for the rest of their life so you don’t have to worry about them when you are gone.
Another growing area is families who find that they are dealing with Alzheimer’s disease, drug or alcohol addiction or even troubled marriages. When these are in the picture, it is critically important to use trusts in your estate planning to protect your loved ones and control the distribution of assets.
Trusts are also used for families who wish to keep their assets private and out of probate, where information about the family’s assets is made public. Property that is not jointly owned or set to transfer directly to a beneficiary can end up being part of the probate process.
Finally, even with the doubling of the estate tax limit, charitable giving still has a role to play in estate planning. By leaving a substantial IRA to charity through a trust, you can avoid the taxes heirs would pay when they liquidate the account. You can also give appreciated stock to a charity through a donor advised fund and bypass capital gains taxes.
As you can see, there are many areas that may need to be reviewed with your estate planning attorney because of the new tax act. Don’t just think about your accountant because this has to do with taxes…think about your attorney just as much. You might just find that there are more impacts in your life that your attorney can help you through than your accountant, even though we’re talking about taxes.