While crafting a comprehensive estate plan is often framed as a safety mechanism for family members, not every New Yorker is married. This could lead to a perception that they do not need to move expeditiously in creating an estate plan. However, it is important for everyone to have an estate plan and this combines with the new Trump Administration tax laws should be factored in when creating or updating it. For single people, it is wise to understand how to prepare an estate plan with the new tax laws in mind.
For 2018, the federal estate and gift tax will have an exemption for individuals for up to $11.18 million. That will rise to $11.4 million in 2019. As time passes, there will be adjustments for inflation. Those who go beyond that exemption will face a 40 percent tax rate. If the estate is worth less than $11.4 million at the time of death in 2019, the person can leave all the assets to loved ones with no concern about a federal estate tax. There is still a need for an estate plan if there are assets that the person wants to go to certain people or the single person does have children. Many people might have put their estate plan together while the estate tax went into effect with half the amount that it is now subject to taxation and they took steps to shield their assets. That is no longer required and changing the document could be a wise step.
When the estate goes beyond $11.4 million, the testator could decide to alter the estate plan and have the executor donate a chunk of it to charities so the amount falls beneath $11.4 million and it will not impact loved ones when they get their inheritance. The annual gift exemption might not seem like a lot at $15,000, but these gifts can be given annually to the same person so the estate’s value can be reduced and there is protection from the tax implications. The person can pay for certain expenses like a loved one’s medical expenses and a relative’s college education.
Changes to the law can have a chain reaction influence on how a person’s estate plan will be carried out. If people created the estate plan before the changes to the tax law, then it is imperative to look at the documents and determine if changes are necessary. When thinking about an estate plan, it is key to consider these issues when determining how to divide the assets and mitigate or outright avoid taxes. Having advice and guidance from an estate planning law firm can help with these and any other issue that comes up.