When you think about estate planning, you may put it on the back burner, thinking that you will have time put a plan in place at a future date. Many people adopt this perspective, and as a result, most Americans are not properly prepared.
Because of this tendency toward foot dragging, once you put your initial plan in place, you may feel as though the job is done. You have finally taken action, and you no longer have to feel this nagging sense of unpreparedness.
It’s great to put a plan in place, but you have to understand the fact that estate planning is an ongoing process. Circumstances will invariably necessitate estate plan updates. There could be changes in your own life, and there can be changes to relevant laws. Let’s look at a potential scenario.
Taxes and Your Estate Plan
The federal estate tax can enter the picture if you have been particularly successful from a financial standpoint. Over the years, the estate tax parameters have been in flux, and these fluctuations have been due to legislative changes.
Even if you are not exposed to the estate tax today, a change to the parameters could change your position.
In 2016, the federal estate tax exclusion is $5.45 million. This is the amount that can be transferred tax-free. We should point out the fact that unlimited transfers between spouses are allowed, but the estate tax can be applied on transfers to anyone else.
You could be exempt from the tax today, but future changes to the tax code could make a huge difference. For example, the White House has proposed budgets that would reduce the estate tax exclusion to $3.5 million.
The proposals were never adopted, but the point is that there are powerful people in Washington who wouldn’t mind a reduction to the estate tax exclusion.
You should certainly keep yourself up-to-date with regard to tax legislation that can impact your estate planning needs. If you visit your estate planning attorney annually or semi-annually to review your existing plan, you can always know where you stand with regard to the estate tax.
Reviews are useful on many different levels, even if you are not exposed to the estate tax. Estate planning is an ongoing process, and you should be fully aware of this when you put your original plan in place.
Download Our Special Report
If you would like to learn more about the estate tax, download our in-depth special report. The report is free, and you can click this link to get your copy: Free Estate Tax Report.
Schedule a Consultation
Our firm can help if you would like to discuss your estate planning goals with an experienced and qualified estate planning attorney. We offer evaluations, and you can contact us through this page to set up an appointment: Sacramento CA Estate Planning Attorneys.
- Understanding the Importance of the Simultaneous Death Act - September 25, 2023
- IRS Confirms Grantor Trust Status Alone Does Not Cause a Step-Up in Basis - September 23, 2023
- National Make-a-Will Month - September 21, 2023