Why Do Any Estate Planning?

Dickinson Wright
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Dickinson Wright

The 2017 Tax Cuts and Jobs Act raised the amount that can be sheltered from federal estate tax in 2019 to $11.4 million for an individual and double that amount, or $22.8 million, for a married couple. Why undertake any estate planning in this relatively tax-free environment? Here are some compelling reasons:

  • After 2025, the current high exclusion amount is scheduled to be cut in half. Given the instability of our current law, individuals and couples with larger estates need to monitor whether their current plans will accomplish their intentions now and into the future. For example, should very affluent individuals act now to lock in the benefit of the current high exclusion through lifetime gifts?
  • Income tax planning is an important component of estate planning. For individuals and couples with nontaxable estates, does their current planning provide appropriately for their loved ones and take adequate account of income tax planning? At death, assets (with certain important exceptions) receive a basis adjustment to date of death values with the result that income tax on built in gain can be avoided. Have individuals and couples planned to maximize this potential benefit?
  • All individuals and couples need to make advance planning for the potential financial risks associated with lifetime disability. The uncertainty of our current law spotlights the benefit, in the proper case, of granting trusted family members or friends authority to adjust a disabled person’s planning if and when our law produces unintended estate planning consequences.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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