A Dangerous Assumption – No Need to Do Estate Planning

With changes in the tax laws at the federal level as well as changes to state death tax laws, some individuals may feel that they do not need to give heed to their estate planning.

With the new tax law roughly doubles the federal estate-tax exemption, to about $11.2 million per person in 2018, a vast majority of individuals will not be subject to federal estate tax. In New Jersey, for decedent’s dying in 2018, there is no estate tax (but dependent upon the class of beneficiaries, there may be NJ inheritance tax and PA has an inheritance tax for all beneficiaries except spousal and charitable). But before you take a call to your estate planner off of your TO-DO list, consider this: The sharp increase in the federal exemption amount means that old wills and trusts may be in urgent need of an update.

There are new opportunities for estate-planning techniques to include creditor protection, defense against elder financial abuse, and maximizing bequests. Just to cement your estate planner’s job security, the new higher exemption amount sunsets at the start of 2026, when the old $5 million exemption—adjusted for inflation—reappears. And the law could be changed legislatively even sooner. State laws can change very quickly.

It’s always a good idea to review your estate plan regularly, regardless of legislative changes. Your net worth changes, you or your children get married or divorced, grandchildren are born—and old documents may no longer reflect your wishes.

A common clause in older wills utilized formulas tie to the federal estate-tax exemption – previously as low as $675,000 vs. the current exemption of $11.2 million. If the language in the will which could stipulate that the amount that can pass free from federal estate tax should go to your children and the remainder to your spouse, would you be happy to disinherit your spouse if your estate was less than $11.2 million?

Older documents could have that result. It might be a good idea to have your estate planning documents reviewed today.

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Kay Sowa

About the Author

Kay Sowa is a paralegal in the Trusts and Estates Group at Capehart & Scatchard, P.A. She is an IRS Enrolled Agent as well as a Certified Trust and Financial Advisor. She oversees the trust and estate administration practice for the firm. She is an accomplished author and lecturer who has frequently spoken on behalf of a number of organizations including the National Business Institute and the Institute of Paralegal Education.

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