“Got a dusty old binder with your will and estate plan? Even if you had your paperwork set up a few years ago, your documents are all now out of date, thanks to new tax laws that went into effect at the turn of the year.”
Even though the exemption for the federal estate tax has doubled to $22 million for couples, one of the important parts of estate planning has to do with your financial well-being, while you are alive: power of attorney forms and healthcare proxies, in case you are unable to make decisions on your own.
You also should make sure that your beneficiary designations are up-to-date, especially on life insurance policies and 401(k)s from previous employers.
The central focus of estate planning is keeping control over your assets, even after you die. You might want your responsible younger daughter to be in charge of your estate and not your older son. You may also want to skip a generation and ensure that your wealth passes to grandchildren and not your children at all.
If your family includes a special needs individual, you’ll want to make sure you have made provisions for their future with a Special Needs Trust (SNT).
Many families who find themselves dealing with Alzheimer’s disease, drug or alcohol addition or troubled marriages, use trusts in their estate planning to protect their loved ones and control the distribution of assets.
Trusts are also used for families who wish to keep their assets private and out of probate, where information about the family’s assets are public documents. Property that is not jointly owned or set to transfer directly to a beneficiary, can end up being part of the probate process.
Finally, even with the doubling of the estate tax limit, charitable giving still has a role to play in estate planning. By leaving a substantial IRA to charity through a trust, you can avoid the taxes heirs would pay when they liquidate the account. You can also give appreciated stock to a charity through a donor advised fund and bypass capital gains taxes.
Talk with your estate planning attorney about reviewing your estate plan, in light of the new tax laws.
Reference: Reuters (Jan. 18, 2018) “Your estate plan needs an update, even if it is new”