Tax Reform and Your Estate Plan: Do You Still Need One?

The Tax Cuts and Jobs Act of 2017 brought significant changes to the tax code for homeowners, business owners, and individuals.

One additional attention-getting change was the estate tax exemption.

Under the new tax code, the estate tax exemption was nearly doubled to almost $11 million for individuals and $22 million for married couples who plan appropriately (the exemption is indexed for inflation, so the final numbers for 2018 may vary).

Upon seeing these kinds of numbers, it’s not unusual for people to ask whether estate planning really makes any sense for them. After all, if the estate tax doesn’t apply to you, why go through the effort of making an estate plan?

But estate planning can be critically important. Here’s why.

Avoiding the unpredictability of probate

One of the top reasons to create a solid estate plan with a qualified estate attorney is to avoid passing away intestate, which means (as you might have guessed) without an estate plan. In this situation, your estate goes through probate and is divided up according to state law.

Probate rules can vary widely from one state to another, and the process is public. In other words, your creditors could have access to (and the ability to be part of) that process.

Steering clear of family disputes

Even if you do have a will in place, your estate could go through probate, which can become costly and challenging for heirs. For example, if you leave someone out of your will who would otherwise have a legal claim, your wishes can be contested.

That means your assets will be inaccessible to your heirs until the court process is completed, possibly at great cost to those heirs.

Caring for children and loved ones

One aspect of estate planning which isn’t financial – but which is arguably far more important – is the care and guardianship of minor-age children. Without a carefully laid plan in place, the court is left to decide where children must go, which can add unnecessary turmoil and chaos to an already-difficult situation.

Keep in mind that anyone can apply to be a guardian, and in the absence of clear instructions from you a judge might consider all of them.

In addition to numerous other critical questions, you might want to consider:

  • Values, parenting style, and priorities
  • Your child’s comfort with the named guardian and their family
  • Proximity to where you already live
  • The person’s (or couple’s) ability and willingness to provide attentive care to your child
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Another part of this process is to help ensure that your chosen guardian would have sufficient resources to care for your child or children, as well as a letter of instruction to provide some clear direction to your chosen guardian about what is most important to you as a parent.

Decisions during incapacity

One estate planning issue that often goes overlooked is incapacity: namely, what happens if you’re alive but not able to make your own decisions? This might occur during a health crisis, accident, or other unforeseen emergency.

Appropriate planning can include:

  • An advanced healthcare directive, or healthcare proxy
  • Designating and empowering someone with financial power of attorney

In both cases, you’d provide clear instructions about what should be done in terms of medical care (such as the “life support or not” question) and where and how to manage your financial affairs if you aren’t able to.

Having conducted this process can save your family and loved ones significant stress in a time of trial, and it can also help to preserve both your personal dignity and your wealth.

How do I start?

There’s no one-size-fits all when it comes to estate planning, but you might want to start by tackling issues like:

  • What should happen to your assets when you pass away?
  • Who will you empower to care for you child if needed?
  • How do you want healthcare decisions to be made, and who should make them?
  • Who should take on your financial affairs if you can’t?

This is by no means an exhaustive list, and many families have additional questions to work through. That’s why we suggest working with a qualified attorney who can help you identify and manage the risk factors and issues specific to your family.

Whatever you do, do get started today if you haven’t already. Whether you’re extremely wealthy or not, estate planning can be a process – but it is a critical one.

Planning for more than one generation?

Estate planning can be a challenging undertaking, and it might have you thinking about bigger issues like your family legacy, relationships, and over-arching goals. If you’re looking for some guidance on how to approach multi-generational financial planning, don’t forget to download our free guide to full family financial planning, From the Bucket List to the Bank. It’s packed with tips and ideas on estate planning, forging family bonds, and managing the risks that come with a multi-generational approach to wealth management.

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Let Us Help!

We can discuss this topic and more at a complimentary appointment. As a bay area retirement planning coaches, we can give you a review and make suggestions based on your retirement objectives.

Important Disclosures

Material provided by Augury Consulting. Augury Consulting is not affiliated with Vitucci & Associates Insurance Services or United Planners Financial Services (United Planners). The opinions voiced in this article are for general information only. They are not intended to provide specific advice or recommendations for any individual and do not constitute an endorsement by United Planners.

To determine which investments may be appropriate for you, consult with your financial professional. Please remember that investment decisions should be based on an individual’s goals, time horizon, and tolerance for risk. Neither diversification nor asset allocation can ensure a profit or prevention of loss in times of declining values. United Planners does not render tax advice.

Securities and advisory services offered through United Planners Financial Services, member FINRA, SIPC. Pasquale Vitucci, CA Insurance Lic. # 0758212, is an Endorsed Agent of Vitucci & Associates Insurance Services CA Insurance Lic. # 0I06319. Vitucci & Associates Insurance Services and United Planners are separate and unrelated companies.
This page contains links to third-party company websites. By selecting a link, you will be leaving our website and launching a new browser window. These links are provided for informational purposes only and should not be viewed as an endorsement, sponsorship, solicitation or other affiliation with respect to any third parties. We are not making any recommendations or providing any advice on securities in particular or investments in general. Neither Vitucci & Associates nor United Planners Financial Services have reviewed the content of, and are not responsible for, the information or the results of the third-party websites.
Further Reading

Tax reform and estate planning basics: http://www.cpapracticeadvisor.com/news/12390227/estate-planning-and-the-new-2018-tax-law

Naming a guardian: https://www.estateplanning.com/Naming-a-Guardian-for-your-Child/

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