Orlando estate planning attorneys know a fair number of folks would opt for a root canal over a discussion taxes and estate planning. Not only are these topics complex and sometimes dry, but they can involve uncomfortable questions about end-of-life plans that force us to confront our own mortality. However, recent extensive changes to federal tax laws has opened the door for abundant estate planning opportunities across tax brackets, making these discussions vital.
Passage of The Tax Cuts and Jobs Act of 2017 has spurred many estate planning lawyers to urge people to revisit their existing plans and create new ones because of the impact of these changes may be substantial, translating to real cash (or losses if you stay on the sidelines).
Temporary changes to the estate tax exemption and gift tax exemptions alone are reason to review your estate plan or weigh options if you’re drafting one for the first time. Additional tax law updates include modifications to the tax basis in life insurance contracts, exemption from the generation-skipping transfer tax, limitations on certain deductions and constrictions on pass-through business benefits. This is only the tip of the iceberg. Although several of these new provisions expire in 2025 (unless Congress extends), that’s enough time to potentially allow your revamped estate plan to reap sizable rewards.
As any good estate planning attorney in Orlando can explain, the general goals of the process are about:
- Crafting a smart plan and legal structure that empowers you to achieve the highest success and financial security in life;
- Ensuring your wishes (pertaining to both health care and assets) are carried out if you are incapacitated or deceased;
- Protecting your loved ones’ financial security;
- Preserving your legacy (via your assets) after death.
Taxes aren’t normally a significant factor. The reason we’re talking about it now is because these amendments have the potential to impact your assets, which are central to any estate plan.
Some of the new tax code elements our estate planning attorneys will examine in helping you map your financial future:
- Increased exemption from estate taxes and gift taxes. Each taxpayer’s exemption from estate and gift tax is doubled through 2025. This means one can now give away up to $11.2 million per individual or $22.4 million per married couple (in life or death) without incurring a federal gift or estate tax. That can result in vast savings. Gift and estate taxes are a big reason people to decide to structure their inheritances the way they do. This has changed those terms.
- Increased exemption from generation-skipping transfer tax. This is a capped exemption allowable for those transferring assets to grandchildren, great-grandchildren and beyond. This exemption amount has also doubled – at least until 2025.
- Limits on deductions. For the next eight years, several deductions are suspended, including those for alimony, moving expenses and the bulk of casualty losses. Access to mortgage interest deductions were also reduced, and one for home equity loan interest was suspended.
- Updated pass-through business benefits. A pass-through business is one that doesn’t pay corporate taxes or income taxes. They include entities like S-corporations, sole proprietorships and partnerships, encompassing about 95 percent of U.S. businesses, including many small businesses in Florida. Normally, pass-through profits are “passed through” to the business owners, who then report that income on their individual taxes and pay it along with the rest of their normal income. Pass-through business owners can now deduct 20 percent of qualified business income, though there are wage limitations – $157,500 for individual filers and $315,000 for joint filers. Those who own service businesses will be subject to a wage limitation of $207,500 for individual filers or $415,000 for joint filers.
Again, these are just a few of the recent tax changes with potential to influence your Central Florida estate planning goals. Have an experienced estate planning lawyer review your plan and help you incorporate necessary adjustments to maximize your long-term financial security and ambitions.
Contact the Central Florida estate planning attorneys at The Chidolue Law Firm, serving Orlando and Lake Mary, by calling (407) 995-6567 or email us.
Your estate plan needs an update, even if it is new, Jan. 18, 2018, By Beth Pinsker, Reuters
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