Is Estate Planning Still Necessary With the Trump Tax Cuts?
Now that Tax Day 2018 is in the rear-view mirror for many Americans, a question many of them will have to reckon with moving forward, is estate planning still necessary with the Trump Tax Cuts? The Tax Cut and Jobs Act was signed into law by President Trump in 2017. The new tax law raises the federal estate tax exemption to $11.2 million for individuals and $22.4 million for couples. The increase means that an exceedingly small number of estates (only about 1,800, nationally) will have to worry about federal estate taxes in 2018, according to estimates from the nonpartisan congressional Joint Committee on Taxation.
So, you may be wondering, is estate planning even still necessary? To put it simply: Yes!
5 Reasons You Need an Estate Plan (Despite the Trump Tax Cuts)
Comprehensive estate planning does a lot more than guard against you owing federal estate taxes. Other than taxes, you and your family likely face a range of estate planning challenges, such as:
- Distribution of your assets. Create your legacy with the help of tools like a trust and/or a last will and testament.
- If you die without a will, state intestacy laws determine where your stuff goes. You lose control, and the people closest to you may feel hurt or may suffer financially.
- If your estate plans do not include asset protection strategies, your lifetime of hard work and savings could be squandered needlessly.
- Cognitive impairment. Dementia, Alzheimer’s disease or other disorders could make handling your own affairs impossible or at least ill-advised. Executing a durable power of attorney (POA), for instance, allows you to choose a person, referred to as an agent or attorney-in-fact, to step in and manage your financial affairs on your behalf. Without this arrow in your quiver, your fate will be left to the public whims of the court, which could appoint someone else—for instance, a public conservator.
- Medical emergencies. What if you become unable to communicate your preferences regarding medical care yourself? Naming someone as your health care power of attorney under a Medical Power of Attorney allows him or her to act as your voice for medical decisions. In addition, a living will or advance directive allows you to specify the types of life-sustaining treatment you do or do not want to receive.
- Specific family situations. Life is unpredictable. You need to consider (and proactively deal with) challenges like the following:
- If you have minor children, you can name a guardian for them and provide for their care through your estate plan. Without a named guardian, the decision of who raises your children will be left to the whims of a judge. Your children may even end up in foster care while the courts sort your affairs out.
- If you care for a dependent with a debilitating condition, provide for her and protect her government benefits using tools like the Special Needs Trust (SNT).
- If you’re married with children from a previous relationship, you need clear, properly prepared documents to ensure that your current spouse and children inherit according to your wishes.
- Probate is the court-supervised process of the distribution of a deceased person’s assets. A veritable avalanche of paperwork awaits your loved ones. But it doesn’t have to happen to your family! Through proper planning, you can keep all of your assets—such as your IRA, life insurance and family residence—outside of probate.
Estate Planning Involves Much More Than Minimizing Estate Taxes
Even prior to the Trump tax cuts, relatively few Americans needed to worry about the estate tax. However, virtually everyone faces one or more of the issues outlined above. Shockingly, a 2016 Gallup poll found that 56% of Americans do not even have a simple will. A 2017 poll conducted by Caring.com found similarly alarming news—a majority of U.S. adults (especially Gen-Xers and Millennials) do not have their estate plans in order.
Don’t use the Trump tax cuts as an excuse for not taking the proper steps to protect yourself and your family. If you don’t have an estate plan in place, or you have an estate plan that needs updating, call McDonald Law Firm so we can help you add yourself to the list of prepared Americans! Get in touch with our team at (443) 741-1088 to schedule a consultation, and take the first steps to getting the peace of mind that you need.
DISCLAIMER: THE INFORMATION POSTED ON THIS BLOG IS INTENDED FOR EDUCATIONAL PURPOSES ONLY AND IS NOT ENTENDED TO CONVEY LEGAL OR TAX ADVICE.