The Tax Cut and Jobs Act (TCJA) is now officially law. Both the House and Senate passed the new tax reform bill in December with straight party-line votes and no support from Democrats. President Trump signed it into law right before Christmas. It is the first overhaul of the tax code in more than 30 years. Everyone needs to review their own estate planning to determine how it is impacted by the new tax law.
There is a common misconception, even before the TCJA that estate plans are only for the ultra-rich – the top 1 percent, 10%, 20%, or some other arbitrary determination of “enough” money. In reality, nothing could be further from the truth and that is especially the case after TCJA.. People at all income and wealth levels can benefit from a comprehensive estate planning review, including provisions to provide asset protection for you and your family. Sadly, many families have not sat down to put their legal house in order regarding estate planning and asset protection planning.
According to a 2016 Gallup News Poll more than half of all Americans do not have a will, let alone a comprehensive estate plan. These same results were identified by WealthCounsel in its Estate Planning Awareness Survey. Gallup noted that 44 percent of people surveyed in 2016 had a will in place, compared to 51 percent in 2005 and 48 percent in 1990. Also, over the years, there appears to be a trend of fewer people even thinking about estate planning. If you love your family, this course of action is a mistake.
When it comes to estate planning, the sooner you start the better. Below are four reasons why everyone – no matter what income or wealth level – can benefit from a comprehensive estate plan:
- Forward Thinking Family Goals: Proper estate planning can accomplish many things. The first step is to ask what your goals are. They may include caring for a minor child, an elderly parent, a disabled relative, or distributing real and personal property to individuals who will appreciate and maintain these assets prudently. Understanding what your family wants and needs are for the future is a great starting point for any estate plan. If you can sit down and spend time planning your vacation, you can do the same for your estate. Your future self, and your loved ones, will benefit and thank you.
- Financial Confidence Now and After You Are Gone: One immediate benefit of having a finished estate plan in place is that you will likely feel in control of your finances, possibly for the first time ever. Many people experience a new sense of discipline in maintaining their finances which can help with saving for retirement, a big purchase, or other goal. In addition to the personal benefit of financial control, an estate plan allows you to dictate exactly how and when your heirs receive an inheritance. This is particularly important for minor heirs or those who need additional guidance or assistance to manage their inheritance, like a disabled child.
- Identify Risks: An important aspect of a good estate plan is to mitigate against future and current risks. One example is becoming disabled and unable to support your family. Another is the possibility of dying prematurely. Through an estate plan you can chose who will be in control of your personal assets, instead of the court appointing a legal guardian who will cost money, be a distraction for your family, and subject all financial decisions affecting your family to be decided by a probate judge who doesn’t know your family. While contemplating these types of risks is never fun, preparing ahead of time ensures your loved ones will be prepared if an unfortunate tragedy occurs.
- To Maintain Your Privacy: In the absence of a fully funded, revocable living trust-based estate plan, a list of one’s assets are available for public view in the probate court upon one’s death. This occurs when a probate court is required to step in if you don’t have a fully funded revocable living trust. Probate is the legal process by which a court administers the deceased person’s estate. A solid estate plan should generally avoid the need for involvement by the probate court, so your family’s privacy can be maintained.
The Bottom Line: Seek Professional Advice
There are numerous benefits to working with a professional team when it comes to estate planning. Estate planning attorneys, financial advisor, insurance agents, and others have a broader and deeper knowledge of money management, financial implications, and the law. When you work with a qualified team to implement an estate plan you can rest easy knowing your family will be taken care of no matter what happens in the future.
We can help you achieve your estate planning goals and objectives, including avoidance of probate, providing your family with protective trusts so that your descendants enjoy the benefits of their inheritance that you have provided for them, and assistance with any special needs that a child, grandchild or other beneficiary may experience.
With the passage of the TCJA, estate taxes are no longer the motivation or driving force behind comprehensive estate planning. Now you have the option and opportunity to develop and implement a comprehensive estate plan that is designed purely to achieve your personal estate planning goals and objectives for your family members.
If you previously have completed a comprehensive estate plan, you will probably want to review your existing plan. With the TCJA, major changes have occurred with regard to the estate tax. There is now a $11.2 million exemption for each adult person. That means a married couple can avoid estate taxes on the first $22.4 million. If your estate exceeds that level, you have the ability to use various new tools to avoid estate taxes on unlimited amounts of assets. If your estate value is less than $22.4 million, then you probably do not need the extensive estate tax planning techniques that you currently have and that are no longer necessary with a few certain exceptions. You can simplify your planning after the passage of the TCJA provisions that include the significant increase in the value of an estate that is exempt from estate taxes.
In short, everyone should review their current estate planning to see how the TCJA has impacted their plan (mostly allows for simplification), and anyone who has not yet completed a comprehensive estate plan should develop one, and work with an experienced estate planning attorney to ensure the estate plan they have in place is the most advantage plan for their particular individual circumstances. Consulting with an experienced estate planning attorney to determine how your estate planning has changed with the new tax law will be of significant benefit for you and your family.