For better or worse, the new tax law will affect everyone. If you don’t keep your estate planning current, then you (and your heirs) stand to lose a lot of that hard-earned cash. This is especially true if you’re one of the many people who were led to believe that estate planning is a relic of the past. For a lot of folks, it makes sense. For some, it doesn’t. How do you know in which bracket you fall? Here’s what you need to know about how the new tax law will affect estate planning procedures.
First and foremost, the tax exemption has ballooned. The exemption stood at $5.49 million in 2017, prior to the new law. Now, that exemption stands at $11.2 million. What this means is simple: if your estate is worth less than $11.2 million, then you won’t be taxed on your holdings. Those who fall in between the new and the old might feel they can relieve themselves of the expense of estate planning, but that isn’t necessarily true–and doing so might relieve you of some income too.
Before you do anything else, make sure you have all your old documents updated to meet the specifications of the new law. Your estate planner is still the person who can do this most efficiently as per your needs. That means your last will and testament, trusts, and current beneficiaries might require a passing glance.
Don’t overlook important details of the new tax law because you’re anxious to rid yourself of a minor inconvenience. Here are the most important things you need to remember:
- You might be able to save on income tax using good estate planning practice.
- Estate planning continues to provide other important benefits such as elder financial abuse security, creditor protection, and protecting inheritance from common pitfalls.
- In 2026, the tax exemption is scheduled to fall back to about $5 million due to inflation.
- Older trusts might accidentally disinherit beneficiaries because of outdated regulations and past exemptions.
Stripping away old estate planning options could leave seniors vulnerable to financial abuse not only because the estate planning options provide certain protections, but because the increased exemption could do the same thing by itself. Durable powers of attorney sometimes provide an agent with the option to make a gift using an incapacitated senior’s trusts, but that might not be a smart move when the exemption is so high.
It’s important to ask questions about the new tax law, and ensure you have all the information before you make a judgment call that could affect your finances in unpredictable ways in the future.