“Estate taxes have been in the crosshairs of many lawmakers for years, because many see them as an onerous form of double taxation that takes money that has already in many cases already been subject to income tax.”
The recent tax law changes have increased the estate tax exemption per person to $11,200,000.” The Motley Fool’s recent article, “3 Reasons You'll Still Need Estate Planning Even if the Death Tax Disappears,” says that an advantage of eliminating the estate tax is that it allows a small slice of the population to simplify their estate planning. For the rest of us, estate planning is still necessary. Here are several reasons why you'll still need estate planning, even if tax reform successfully ends the federal estate tax.
- Direct your assets where they're most needed. The most obvious reason: to direct the disposal of assets after your death. You’ll want to protect minor children with trusts to guarantee wise financial management of their assets after your death. If you’ve been married multiple times with children from different marriages, you also need to really get a grip on estate planning to avoid any problems before they arise.
- A few states still have estate taxes. Tax reform will address federal law, but the federal government doesn't have power over how states tax their residents. The majority of states don't have an estate tax Including California), but 14 states, plus DC do. Six states also have inheritance taxes that apply to the recipients of gifts. Of the states that have their own estate taxes, the exemption amounts are often much lower than the federal exemption of $5.49 million. Therefore, more people should plan their estates with state estate taxes in mind.
- The need for federal tax planning won't disappear. Right now, the trade-off that taxpayers receive is this: in exchange for potentially being subject to estate tax, you have a step-up in the tax basis of inherited assets, which eliminates capital gains tax on any appreciation the prior owner earned before death. Many people have to compare estate tax to income tax and plan for the better outcome.
Don't cut corners with your estate planning. Even if the estate exemption at $11,200,000 f you will not be subject to estate tax at death you still need to do basic estate planning, from writing a will to possibly creating a trust to making certain your assets go where you want, having a Power of Attorney, Health Care Directive and other documents in place. Without estate planning, you can cause financial and emotional strife to those you leave behind.
One of the main goals of our law practice is to help families like yours plan for the safe, successful transfer of wealth to the next generation. Call our office today to schedule a time for us to sit down and talk about your estate plan, where we can identify the best strategies for you and your family to ensure your legacy of love and financial security. Our office is located in Santa Ana, CA but we serve all of California including Irvine, Orange, Tustin, Newport Beach, and Anaheim.
Reference: The Motley Fool (October 21, 2017) “3 Reasons You'll Still Need Estate Planning Even if the Death Tax Disappears”