On behalf of Chandler and Brown, Ltd. posted in estate tax on Wednesday, July 19, 2017.
President Donald Trump and the United States Congress have made proposals for tax reform, including the possibility of reforming the estate tax. Currently, assets above the $5.49 million exemption for individuals are subject to a 40 percent estate tax. With the uncertainty as to the future of the estate tax, wealthy individuals in Saint Paul may be holding off on making estate planning decisions.
For example, a person can use trusts to reduce the size of the estate that is subject to the estate tax. However, some individuals are waiting to see if the estate tax will be repealed before creating a trust, which could be complicated. Other individuals might also wonder if they should transfer some of their assets to others by gifting them as a way to reduce the size of their estate. However, it is important to keep in mind that the $5.49 million tax exemption is applicable to any gifts made. A gift tax will be levied on the amount of gifts made above the exempt amount.
In the end, instead of waiting for Congress to act one way or the other, it may make sense to make estate planning decisions that simply meet one’s long-term goals. Basic estate planning documents can be drafted. These include a will, trusts, a healthcare proxy and a power of attorney. Trusts can protect one’s assets from both creditors and possibly from federal and state taxes. It is also a good idea to review any existing estate plan that is in place to ensure it still meets one’s needs.
While the possible repeal of the estate tax may be of interest to well-to-do individuals in Saint Paul, they should not let this stop them from creating an estate plan. Not only is it unknown as to whether the estate tax will be repealed, but neither can one predict when they are going to pass away. It is best to be prepared for the fact that, as it stands now, if your assets exceed a certain amount, they may be subject to the estate tax and plan accordingly.