The Tax Cuts and Jobs Act law created sweeping changes to the income tax system in 2018, but it also impacted federal estate and gift taxes. For high-net-worth planners, the impacts were simple in terms of legislation. However, the implications of the large increase in the estate and gift tax exemption are complex and affect everyone planning their estate – not just the small percentage who will still file estate tax returns. This article featured on The Tax Adviser reviews the changes to the tax framework and discusses how the changes affect the 99% of people who will not be filing a Form 706 (United States Estate and Generation-Skipping Transfer Tax Return).
As of 2018, only 17 states as well as Washington, D.C., maintain either an estate tax or inheritance tax. The state exemption amounts have also increased dramatically for a number of those states. Because of this, the number of taxable assets has gone from small to microscopic. Between the increase in the federal level exemption and states eliminating their estate taxes, the landscape of estate tax planning has drastically changed in the last 20 years. Pair this with how infrequently the average person revisits his estate documents and there are more likely than not a vast number of outdated estate plan documents in most people’s dusty file drawers.
Many people think estate planning does not apply to them since the federal tax exemptions are so high. However, the numerous nontax factors warrant attention. These include custody of minor children, how assets will be administered for a surviving spouse, addressing special needs and more. If you haven’t thought about planning your estate or haven’t looked at yours since you created it in the ‘90s, now is the time to give it some attention.
If you are ready to discuss your estate plan, give Rhodes Law Firm a call today!