Will Tax Reform Disrupt Your Estate Plan?

October 26, 2018 | Article

As part of the 2017 Tax Cuts and Jobs Act, there have been changes related to the estate and gift tax exemptions that may impact your estate planning documents. The federal estate tax exemption has increased from $5 million to $10 million indexed for inflation. The federal exemption is currently $11.18 million, per person, in 2018.

The increase in the federal estate tax exemption does not mean that you should postpone or put planning on the backburner. The increased estate, gift and generation skipping tax exemption is scheduled to sunset on January 1, 2026. In 2026, the exemption will revert back to $5.6 million, per person, indexed for inflation.

The concept of portability is also still a consideration. Portability is an election that allows a surviving spouse to receive the unused exemption amount of the first deceased spouse. Any unused exemption amount could be passed to the surviving spouse by timely filing an estate tax return, which could allow the surviving spouse to avoid any federal estate tax at their death. With the implementation of the Tax Cuts and Jobs Act and permanency of portability, planning is more important now than it has ever been.

A-B Trusts
Before the Tax Cuts and Jobs Act was instituted, many people implemented an estate plan concept that established a trust at the first spouse’s death. The trust was funded with assets up to the deceased spouse’s remaining federal estate tax exemption. The remaining assets funded a second trust for the surviving spouse. This particular estate plan concept has many names (A-B trusts, credit shelter trust, family-marital trusts). With the implementation of the Tax Cuts and Jobs Act, this concept may no longer be as tax effective as it once was.

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Our Wealth and Transition Services team will review your estate planning documents and provide a one-page diagnostic outlining the key provisions in your document and provide considerations for possible updates to your will and/or trust.

If you would like your estate planning documents reviewed, please email the following information to our helpline:

  1. Your name, phone and email address
  2. A copy of your current estate planning documents (wills and trust documents) including all amendments
  3. State of residency
  4. Current net worth range: (0-$5 million, $5-$10 million and $10+ million)

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