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Steps to take when tax laws change

On Behalf of | Nov 6, 2020 | Estate Planning, Tax Law

The Tax Cuts and Jobs Act of 2017 made several changes to the federal tax code that are scheduled to remain in effect until at least 2025. Generally speaking, it is a good idea to review your estate plan whenever tax laws are altered. Take a look at some steps that you might want to take to ensure that an existing plan still meets your needs.

Flexibility is key

In 2025, the federal estate tax exemption will likely drop from $11.85 million to $5 million. Therefore, it might be a good idea to include language in a current trust that allows assets to be placed in a new one with different rules at some point in the future. It may also be a good idea to allow a trust protector to change an existing trust’s terms if necessary.

Don’t rush to undo prior changes to your estate plan

It may be tempting to do away with any plans that you made before the most recent tax reforms became law. However, this may not be a good idea because there is no guarantee that these changes will become permanent. For instance, if you have an irrevocable life insurance trust, it’s still likely in your best interest to keep paying the premium on the policy held inside of it.

If you have any questions about how changes to tax laws could impact your estate plan, it may be a good idea to consult with an estate planning attorney. An attorney might review your plan’s current structure and provide insight into whether it likely meets your needs. An attorney may also suggest changes to an existing will or trust in an effort to accomplish important objectives or ensure compliance with state laws.