Potential Estate Planning Effects of the Tax Cuts and Jobs Act
The Tax Cuts and Jobs Act, signed into law by President Donald Trump at the tail end of 2017, has wide-ranging implications when it comes to taxes, divorce and estate planning. High-wealth individuals and families benefit the most under the estate planning-related provisions of the law. Therefore, if you have a large, valuable estate, it’s important to understand the changes and how they could affect your estate plan.
Previously, the amount of money or the value of an estate an individual could pass on to beneficiaries tax free was capped at $5.49 million. Under the new law, that exemption limit has been doubled to $11 million for individuals (and $22 million for couples).
To that end, if you had been planning your estate in hopes of limiting your tax liability past that $5.49 million mark, you now have significantly more room with which to work.
Additional estate planning considerations
One common estate planning strategy is to use a collection of trusts to provide for a spouse while passing assets tax free to children through the estate tax exemption. However, if you created your will before this year, it’s possible that you have not stated a specific dollar amount for how much money should go into a trust for your children.
Many older wills refer to the “current federal estate tax exemption amount” or similar words as the amount used to determine the inheritance of children. The remainder of the estate goes to a trust for the spouse. With the estate tax exemption limit now considerably higher, take a moment to revisit the language of your estate plan and decide whether the will’s wording still expresses your intent, under the terms of the new tax law.
For more information on how tax reform could change the way you approach your estate plan, meet with an experienced Tampa estate planning attorney at BaumannKangas Estate Law.