The new federal tax law brought on a number of changes, some of which could impact your future plans for your estate. It’s important to update your estate plan periodically, especially after major new laws are passed.
For instance, the law addresses estate taxes, which are paid to the government when you pass away. The government doesn’t tax smaller estates, though, setting an exemption. Only those in excess of the exemption are taxed.
The new law doubled the exemption. This means people who would have been well over the limit before the new law, and subject to significant taxes, now may be well under the limit. In short, more money will pass on to the family and less will go to the government.
The limit prior to the new law was $5.6 million. Any estate over that mark was taxed. The new limit is $11.2 million. So, if your estate is worth $10 million, you were probably factoring in taxes on nearly half of it when you drew up the legal plan. Now you don’t have to count any federal estate taxes at all.
Additionally, the law applies at that rate to individuals. If you are married, you and your spouse get a limit of $22.4 million, which is simply $11.2 million for both of you.
This means that most people will not have to worry about federal estate taxes under the new plan. Reports show that only around 5,000 estates are over that new limit annually. Everyone else falls within the exemption.
Remember, it’s wise to consider your estate plan and make updates on a regular basis. Be sure you know what steps to take.
Source: Forbes, “5 Questions To Ask Your Estate Planner After The New Tax Law,” David Robinson, Jan. 09, 2018