Building Legacies that Last Estate Planning and Elder Law

New Tax Law Creates New Advantages

Pexels-photo-209224It might be wise to take a fresh look at your estate plan for new options.

Many estate plans will need to be changed to take advantage of the new tax laws, according to the Wills, Trusts & Estates Prof Blog in "A Gift from the New Tax Act: Kill That Trust."

One of the key changes for estate planning purposes, is that the estate tax exemption has been doubled.

Thais means people with estate plans that created trusts for the sole purpose of limiting their estate tax exposure may want to revisit their plans. They might now be better off revising those trusts or even getting rid of them altogether.

An estate law attorney can advise you on creating an estate plan that fits your unique circumstances and may include a trust or dealing with the doubling of the estate law exemption.

Reference: Wills, Trusts & Estates Prof Blog (Dec. 26, 2017) "A Gift from the New Tax Act: Kill That Trust."

 

2018 Estate Tax Exemption Projections

TaxesThe IRS has not yet announced what the 2018 estate tax exemption will be. However, expert analysts think there will be some slightly good news for wealthy people.

They predict that the exemption should increase to $5.6 million for a single person and more than $11 million for married couples.

At the same time, they predict that the annual gift tax exemption should also increase to about $15,000, as Forbes reported in "Estate Tax Exemption To Top $11 Million Per Couple in 2018."

This should give wealthy people and their estate planning attorneys a little bit more flexibility, as they attempt to shrink estates to below the threshold.

While most people who might be affected by this exemption increase would prefer to see the estate tax repealed entirely, that is increasingly looking like it will not happen this year.

Congress has turned its attention to tax reform, but getting anything passed could be a long process and will likely continue into next year.

Repealing the estate tax is also controversial. If Democratic votes are needed to pass tax reform legislation, that might take the estate tax off the table.

If you have questions about your estate and how it might have an impact on the estate tax, then you should see an experienced estate planning attorney in your area.

Reference: Forbes (Sep. 15, 2017) "Estate Tax Exemption To Top $11 Million Per Couple in 2018."

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Why Trusts Are Better Than Wills

Wills-trusts-and-estates-covered[1]Most estate planning attorneys believe that trusts are generally a better way to distribute an estate than wills. It is important to know the reasons why that is.

If you spend any time at all talking to estate planning attorneys or researching estate planning online, it will not be long before you hear that trusts are usually better than wills for estates. This has become such a truism, that even many non-attorneys instinctively suggest a trust when a friend asks them about estate plans.

While it should be noted that trusts are not always better, it is true that they almost always are. Particularly, in Maryland and the District of Columbia, which have Maryland estate taxes and DC estate taxes, which are lower than  federal estate taxes, trusts are especially helpful.

Recently, Wicked Local Norwood listed some reasons why that is the case in "Five Ways in which a trust is better than a will," including:

  • With a trust you can avoid probate, which can be expensive and time-consuming. Most wills have to go through probate court.
  • A trust can be drafted that protects your beneficiaries from creditors. If you give heirs money outright in a will, then any creditors they have can go after that money. Trusts avoid this problem.
  • Special needs trusts can be used to give assets to people with disabilities without making them ineligible for government benefits.
  • Trusts can be used to reduce estate taxes in ways that are impossible to do with wills.
  • With a trust, you can leave assets for minor children that are managed by a third-party without the unnecessary intervention of probate courts.

All that noted, wills have the benefit of a neutral judge overseeing the process and “testamentary trusts” can be created under wills that accomplish the same ends as those available through a revocable living trust that avoids probate.

Regardless, consult with a qualified estate planning attorney to evaluate the best approach for your unique circumstances.

Reference: Wicked Local Norwood (May 14, 2017) "Five Ways in which a trust is better than a will."

 

Estate Tax Uncertainty


Business_meeting[1]President Trump has made an official proposal to repeal the estate tax entirely, as expected. That  raises more questions than it answers.

While campaigning for the Presidency, Donald Trump frequently said that, if elected, he would repeal the estate tax entirely. As with all political campaign promises, that did not necessarily mean he would follow through soon on the promise, if he did at all.

However, President Trump recently released a tax reform proposal that calls for a total repeal of the estate tax, among other things.

That does not mean that anyone should make plans for the end of the estate tax, as Investment News points out in "Trump tax proposal leaves advisers in the dark on estate tax repeal."  Moreover, the plans of President Trump only cover the federal estate tax, and not the estate taxes imposed by states.  Maryland and DC impose a state estate tax and Virginia does not.  Consult a Maryland estate planning attorney or DC estate planning attorney to consider how those taxes should affect your estate plan.

The biggest issue is how an estate tax repeal will get passed in Congress, if it can be at all.

Ordinary legislation requires 60 votes in the Senate to pass without a filibuster. It is unlikely that any large tax cut on the wealthy will be able to get those votes, since Democrats have vowed to block them.

The budget reconciliation process can be used so that only 50 votes are needed to pass an estate tax repeal, but there are many restrictions on that process. The most important one is that anything passed must be revenue neutral, which means that any cuts have to be offset with tax increases elsewhere.

If the cuts are not revenue neutral, then the law must sunset after 10 years.

The estate tax would come back.  

President Trump has previously proposed changing capital gains taxation to offset the estate tax repeal, but it is not known how much support that idea has in Congress.

Both the President and Republicans in Congress, would like to see many more tax cuts that also have to be paid for, which might mean the estate tax repeal could be dropped for other priorities.

Reference: Investment News (April 27, 2017) "Trump tax proposal leaves advisers in the dark on estate tax repeal."