Does The New Tax Law Mean I Need A New Estate Plan?
The answer to this question is the stereotypical lawyer answer – it depends. The “Tax Cuts and Jobs Act” that was signed into law by President Trump in late December will significantly impact large estates, but even folks with smaller estates should make an appointment with their estate planning attorney if it has been a few years since your plan was last updated.
The next tax law does a lot of different things, but for strictly estate planning purposes it really only does one big thing. The law temporarily doubles the exemption amount for estate, gift, and generation-skipping taxes from $5 million, to $10 million. This new limit is in effect for tax years 2018 through 2025. In 2026, if no extension is passed, the limit will revert back to $5 million.
However, the exemption is not a flat $5 million. It will be indexed for inflation each year, and as in the past, couples can plan together and double their exemption.
There is no way to predict if this new exemption amount will be extended beyond 2025, or even if it will be in place until then since Congress could pass another bill tomorrow that changes things again, so it is better to take action now if your estate can benefit from the higher exemption amount. For example, if your estate plan involves gifting to trusts, you might want to do that gifting while the exemption amount is at this higher level rather than using your exemption as an estate tax exemption at death.
Even if your estate is not impacted by the new law, it is a good idea to schedule a check-in with your estate planning attorney. Depending on how long ago your estate plan was made, it may not include all of your current family members in it. Or, it might include property that you no longer own or a donation to a charity that no longer exists. Or, you may have different views about what you want your end of life care to look like.
In order to make sure that your estate plan accurately reflects your goals, you should make an appointment to meet with your attorney to go over your plan every 3-5 years.