7 Reasons To Revisit Your Estate Plan, Trump Tax Law Aside
By: Rob Clarfeld - June 13, 2018
The recently passed “Tax Cuts and Jobs Act” (TCJA) contains a major change to the Federal estate tax laws – the doubling of the individual estate gift and GST tax exemptions to approximately $11.2 million (double this for couples). This will greatly reduce the number of people who will be subject to the estate tax. So even if one is unlikely to be subject to Federal estate taxes (note: many states do not follow Federal estate law), there still are many sound nontax reasons to revisit estate planning and possibly update your prior documents.
1. Disposition of assets: Even if you use a revocable trust as part of your planning, a will often serves as a primary vehicle for communicating your intentions. More specifically, the provisions of one’s will can designate how assets will be transferred – outright to beneficiaries; to an existing trust (inter vivos trust); or, into a new trust that will be created under the provisions of the will (testamentary trust). Testamentary trust provisions in the will also may specify ages of beneficiaries, or other provisions, that determine when beneficiaries will receive assets. Wills also contain specific bequests of financial and nonfinancial assets (family heirlooms). Frequently, charities are named as recipients of bequests.
2. Administration and financial management of your affairs:Upon one’s passing an estate is created. The person or institution managing the affairs of the estate is the executor or personal representative. Very briefly, the executor is tasked with the marshaling and accounting of your assets and liabilities, working with the courts (probate) and disposing of your assets in accordance with your wishes. There also are related tax and administrative filings. If trusts are created under your will, another fiduciary, your trustee(s), will administer them.
3. Guardianship for children: If you have minor or disabled children, your will is the document that specifies your choice of a guardian, and a successor guardian. Of course, the surviving spouse is the obvious choice, but simultaneous deaths do occur. Also, depending on circumstances, you might want to consider a monetary stipend for your guardian.
4. Use of Trusts: Thoughtful estate planning often suggests the use of trusts. Trusts allow for an element of control over assets and their use through distributions. This control may be particularly important when leaving assets to children (both minor and adult), someone who has disabilities, addiction or spendthrift issues, and often, for a financially unsophisticated spouse. Trusts can offer various degrees of protection from divorce and the claims of creditors and predators. There are many types of trusts. As mentioned above, trusts are either set up during your lifetime (intra vivos) or upon the grantor’s passing (testamentary), and are controlled by state law.
5. Ancillary Documents: Along with the will, there are other documents that are important to the estate planning process, such as the health care proxy, health care directives (living will) and a general durable power of attorney over financial matters. I also like to add another, less formal document as a follow-up to the estate planning process – your letter of intentions.
6. Tax Efficiency: For many years, estate planners heavily focused on the titling of assets for married couples to assure that the first to pass would be able to fully utilize their lifetime credit. Several years ago, tax law introduced the concept of “portability,” which, in effect, allows any unused credit from the first to pass to inure to the benefit of a surviving spouse. Some older wills required any unused lifetime credit to go into a bypass trust. Such provisions likely did not anticipate the doubling of the exemption.
Article Source: Forbes
** Disclaimer Required by IRS Circular 230** Unless otherwise expressly approved in advance by the undersigned, any discussion of federal tax matters herein is not intended and cannot be used 1) to avoid penalties under the Federal tax laws, or 2) to promote, market or recommend to another party any transaction or tax-related matter addressed.