Estate planning is considered an important step that is best taken sooner rather than later. However, when tax policies are in flux because of a new White House administration, important decisions are put on hold for all the right and all the wrong reasons.
Current Congress inaction over tax reform is forcing some well-to-do investors to consider delaying their estate plans.
The stakes are significant in a fight held under a bright spotlight. High-income earners face the possibility of significant tax cuts, specifically one proposed by President Donald Trump: the repeal of the estate tax, currently at 40 percent on assets exceeding the $5.49 million exemption per person or $10.98 million for a married couple.
If enacted, the common practice of transferring assets into trusts to reduce a taxable estate may become a thing of the past. Legislative delays could force investors to wait on their estate plans as Washington works on the partisan wedge inherent in any type of tax code overhaul.
For those even considering moving forward with a plan prior to any repeal, they may need something done that can be undone should tax policies change.
Putting off estate planning is never a sound strategy. Many factors beyond federal estate taxes should be considered when establishing trusts. Asset protection from creditors or state income taxes may be reason enough to move forward with some form of plan.
Even a barebones package of a will, living trust, healthcare proxy and power of attorney can minimize the chaos family members would experience without a plan in place. Not to mention the legal fees and other costs associated with probating an “unplanned” estate.
The estate tax has come and gone five times throughout history. Whether it stays or goes during this legislative session, one thing is for certain.
Betting on congress to take action is usually a fool’s wager.