Do You Know How to Prepare Your Estate for Proposed Tax Law Changes
Are you aware of the news stating that the tax benefits that most Americans have benefited from for the past few years are under threat of being eliminated? In our practice, estate planning, and the variations surrounding passing your generational wealth to your family, continues to be at the forefront of our minds. Many of the current incentives and benefits in estate planning stemmed from the Tax Cut and Jobs Act of 2017, whose laws were to sunset in 2025. Now with the changes currently in front of Congress we may see proposed tax changes implemented as soon as 2022.
Is it true that one of the main focuses of the Congressional effort to raise money for a 3.5 trillion-dollar spending plan is to raise the taxes paid by the most affluent Americans? Not exactly. Congress may not specifically address the billion-dollar families, but focus instead on the families that have accumulated money in the million-dollar range. Most of the planning by Congress will be focused on both tax appreciated wealth and larger inheritances. There could be a significant impact on your Florida estate plan. As a result, you need to make sure that you are carefully monitoring the strategies you need to implement to preserve as much of your financial legacy as possible.
Because of the shortened time frame in the implementation of existing tax laws, Floridians have a limited amount of time to update their estate planning. We want to share the following three tips with you on how to prepare your estate for these proposed tax law changes.
1. First and foremost, work with an experienced Florida estate planning attorney. While there may be times to cut corners and work with someone who is less experienced, now is not one of those times. Congress has made its intentions clear. It will raise money, if it is allowed to do so, through taxing generational wealth and formerly exempt transfers to your intended beneficiaries. You need to work with an attorney who is not only skilled in navigating these challenges but who is dedicated to staying abreast of them and can implement the legal protections you need.
2. You will want to understand the changes that may be coming and if they will impact you. Because Florida does not have a death tax, it is often viewed as a safe haven for retirees and business owners to move to and protect their personal net worth. Floridians are, however, still subject to federal estate and gift tax rules. Right now, if the Congressional proposal succeeds and the TCJA’s estate tax exemption expires early, before 2025, it would lower the current exemption from $11.7 million to $5 million for individual taxpayers.
3. Learn about the complex estate planning strategies that may be removed. If you already have an estate plan in place then your estate planning attorney has most likely already worked with you to implement the strategies that can give you the most favorable tax consequences possible, both in Florida and federally. Right now, there is a proposal in the House to limit or remove several of the most popular estate planning techniques to protect you and your family. This includes the use of grantor trust and transfers with specific, discounted value structures. Further, President Biden’s proposed plan could impose a capital gains tax on appreciated estate assets.
As we watch Congress move closer to a decision each day, now is the time to update your existing Florida estate plan under the guidance of an experienced attorney. If you do not have a Florida estate plan right now, time is of the essence. Our office is here to help. Please contact us today to schedule an appointment.