Berge & Berge, LLP Blog

Tuesday, September 11, 2018

Five Reasons You Should Revisit Your Estate Plan After the New Tax Law

The changes to the federal tax laws in the Tax Cuts and Jobs Act of 2017 (TCJA) have far-reaching implications for many taxpayers. In addition to your personal income taxes, the changes in federal tax laws by the TCJA may impact your retirement planning and estate planning goals. As with any substantial change in tax laws, you need to review your estate plan with your California estate tax planning lawyer. You may need to make extensive changes to your estate plan to protect yourself and your heirs.

Five of the issues that might impact whether you need to revisit your estate plan are:

1. Does the new federal tax law increase my federal estate taxes?

The good news for taxpayers is that the new federal tax law substantially increases the exemption amount of an estate’s value for federal estate tax purposes. The new tax law doubles the exemption amount. Unless the value of your estate is above $11.2 million, you will not pay federal estate taxes. Unless your estate exceeds the new federal estate tax exemption, you may not need to change anything in your estate plan.

2. How does the law affect California estate taxes?

California is one of many states that does not have a state estate tax. Therefore, the new law has no impact on estate taxes at the tax level for California residents. However, if you own property in a state that has an estate tax, you should consult with your California estate tax planning lawyer to confirm that the new tax law will not have an impact on property located in other states that might have an estate tax.

3. Do I need to change my trust agreements?

Many estate plans utilize trust agreements as a way to avoid probate, thereby avoiding estate taxes. However, with the new tax law, some of these trust agreements may no longer be necessary to avoid federal estate tax. Eliminating a trust may benefit heirs who inherit assets through your estate by lowering their personal income tax obligation. Your California estate tax planning lawyer can help you determine if the purpose of the trust continues to benefit your heirs beyond avoiding federal estate taxes.

4. Does the new tax law impact exemptions for spouses?

The new tax law preserves the portability rule for spouses. Portability allows a surviving spouse to utilize the unused portion of the deceased’s spouse’s federal estate tax exclusion. Because of the large increase in the federal estate tax exemption, spouses should review their estate plan to determine if they can take advantage of portability to decrease or eliminate the federal estate tax.

5. How can I use lifetime gifts under the new tax plan?

In addition to doubling the federal estate tax exemption, the new tax law also doubles the amount for lifetime gifts. Even though the lifetime exemption for gifting has changed, this change may not impact your estate plan. Gifting can be complicated and have unintended tax consequences for your heirs. Your California estate tax planning lawyer can assist you in reviewing your lifetime gifting strategy to determine if you should change any of your estate plans based on the increase in lifetime exemptions for gifting.

California Estate Tax Planning Attorneys Can Help

There are many reasons why you may need to review your estate tax plan, including changes in federal tax laws. However, it is a good idea to review your estate plan periodically with a California estate tax planning lawyer to ensure your plan meets your goals and needs in addition to carrying out your desires. If you have not reviewed your estate plan in several years, we encourage you to schedule a consult with the California estate tax planning lawyers at the Law Offices of Berge & Berge today.

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