Texans who are estate planning have long considered tax implications as a potential issue for heirs. The last thing that a person wants to do when crafting an estate plan is to leave the heirs with a huge tax bill. With the new presidential administration of Donald J. Trump, the estate tax - also referred to as the death tax - was a campaign issue and he asserted his intention to repeal it. Those who are crafting an estate plan should think about if and how to account for the repeal if it happens.
As of now, the federal estate tax is 40 percent. The laws dictating the estate tax were put into place in 2013. Individuals are exempted if they receive up to $5.49 million. For a couple, that amount is $10.98 million. If a spouse dies and leaves all his or her assets to the spouse, there will be no tax. The repeal of this tax will only be a consideration for those who have these large sums of assets.
Even if the estate tax is repealed, it is still important to remember the necessary foundational aspects of a coherent estate plan. Part of that is having a power of attorney for financial and medical issues if the testator cannot make decisions on his or her own. Without the estate tax, it does not benefit heirs who receive retirement accounts, life insurance and assets. For those with children under the age of 18, there might be the need for a guardianship. The estate tax has no bearing on that.
Determining when heirs will receive access to the assets is also a factor. Having it written into the plan how the assets will be distributed in such a circumstance can be addressed. While the repeal of the estate tax might offer a semblance of relief to those who are subjected to it, it is believed that the government will try to find another method to collect from people who have a large inherited portfolio. The state tax is not a concern for Texans as there is not one in the state.
The estate tax and whether it is in place or not is something that should be factored in when crafting an estate plan. Those who are considering estate tax planning and any issue related to estate planning should make certain to discuss the matter with an attorney to craft strategies to benefit themselves and their heirs.
Source: forbes.com, "Do You Still Need An Estate Plan If There Is No Estate Tax?," Lindsay Garland, March 23, 2017