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Tailoring an estate plan based on the new tax laws

Texans who are drafting estate planning documents should pay close attention to changes in laws that come about with every governmental power shift. Such is the case with the Trump Administration and its changes to federal tax laws. With it, the amount that people can pass on to heirs doubled without the need to think about the estate tax or to use various trusts to shield wealth.

Heirs can get slightly more than $11 million as individuals with the changes to the estate tax. Couples can get double. Other strategies, in conjunction with these changes, save people even more. For example, an irrevocable dynasty trust can be used to grow an estate, sans concern about the estate tax, and continue passing those assets along for generations. Another tactic that people might want to consider is simply amending a will to account for changes in the law.

For people who have an uncomplicated family situation and are not concerned about various heirs from a second marriage or minors, it might be a wise step to discard trusts completely. Portability exemptions for spouses reduces the need to create a trust to give more to spouses.

But, trusts can lead to capital gains taxes. And, new strategies are being crafted to avoid this. The bigger exemption from estate taxes is sparking ideas, such as a “mother-in-law trust,” where a mother-in-law or an older relative is given a general power of appointment instead of an irrevocable trust. At the mother-in-law’s death, the assets will get what is known as a “step-up.” Step-ups can avoid a capital gains tax.

The individual situation is paramount when creating an estate plan. Changes to the tax laws and greater freedom for people with substantial portfolios to pass more to their heirs without worrying about taxes is a positive sign. However, everyone’s needs and circumstances are different. Wills, trusts and the different options with estate planning should be tailored to suit the person’s purposes. A legal professional who is experienced in estate planning can explain step-ups, portability, the estate tax and more and assist in cobbling together a solid document.

Source:, “Trusts in the Age of Trump: Time to Re-Engineer Your Estate Plan,” Ashlea Ebeling, Feb. 13, 2018