Reviewing your estate plan in light of the TCJA

On Behalf of | Jun 10, 2020 | Firm News

Creating an estate plan often requires a great deal of consideration, research and thought. Like other Connecticut residents, you will need to figure out how to divide your assets, choose the individuals you want to administer your estate and/or trust, and consider the tax implications of your decisions at both the state and federal levels.

If you created your estate plan prior to 2018 when the Tax Cuts and Jobs Act went into effect, you may wonder whether your plan could benefit from some tweaks. If you have not already done so, now would be a good time to review it.

What TCJA changes may apply to you?

Even though the TCJA may currently affect your estate plan, you may want to remember that some of its provisions expire in 2025. For this reason, you may not want to make drastic changes, but only those that will benefit you and your loved ones in the intervening years, such as the following:

  • Review using the option of gifting assets to your loved ones now rather than upon your death.
  • Make the most of your spouse’s unused exclusion.
  • If you don’t have a trust, now may be the time to create one.
  • If you have a trust, make sure that it provides you with the best tax-avoidance strategy both now and in the future.
  • Give your successor trustee the option of creating a new trust with different terms if it would make more sense upon your death.
  • Adjust the terms of your trust to allow more flexibility for your beneficiaries to decide how the remaining assets will go to his or her beneficiaries upon their deaths.
  • Allow your successor trustee to substitute certain assets in the trust if it would help reduce tax liability.

The more flexibility you incorporate into your estate plan, the greater the chances are that your estate will not have to shoulder a large tax burden upon your death. In addition, you may want to make sure that any changes you make will actually benefit you and your loved ones over the long term since tax laws can change at any time. Of course, a periodic review of your estate plan could help prevent this from happening, but you don’t want to have to change your documents too often.

After reviewing your current and future tax situations, you may find that changes to your estate plan are needed. However, it would most likely be a good idea to confirm your suspicions with an experienced tax attorney before making any changes that could end up costing your loved ones in the future.