New Tax Laws: Your Estate Plan May Already Be Out-of-Date

If you have not updated your estate plan in the past few weeks or months, it may already be out of date. Many of the safeguards and tax-saving measures you put into place as a part of your estate plan may no longer be needed due to the extensive tax law changes — the Tax Cuts and Jobs Act (TCJA) — that came into effect on Jan. 1.

Changes affecting wealthy individuals and couples

If you have an estate valued over $5 million (or over $11 million as a couple), provisions in your estate plan were designed to take advantage of the federal estate tax exemption. Amounts that met or exceeded $5.6 million for individuals and $11.2 million for married couples were taxed at 40 percent.

Careful planning probably kept your estate from exceeding the caps established by the feds. If you already exceeded the caps, you may have created specialized trusts to avoid the federal estate tax and to protect your hard-earned assets for future generations.

Now, the situation is vastly changed. The TCJA doubled the caps to $11.2 million for individuals and $22.4 million for married couples. Only estates that exceed those caps will incur federal estate tax liabilities. This means that some of the carefully drafted provisions in your estate planning documents — even if you just updated them — will need to be updated, at least for the time being.

There are no guarantees

Keep in mind that these changes will not last forever. Congress may make future changes that reverse what the current administration has put into motion. Also, many of the progressive changes will end — and some will revert to former levels — in 2026, a mere eight years from now.