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When Was the Last Time You Reviewed Your Will?

If you don’t remember the last time you reviewed your will, checked your beneficiaries on insurance policies or retirement accounts, that’s a big red flag: it’s time.

There have been many changes in recent years to the laws that affect estate plans, and there may be more coming, Wealth Advisor in a recent article—“Tune-Up Your Estate Plan in Light of Changing Conditions.” Do you know if your estate plan still works?

The federal estate tax gift and estate tax exemption amount is now $11.4 million, indexed for inflation, which is an all-time high. A married couple can transfer twice that amount to children or others, or $22.8 million, without any federal gift and estate tax. The federal exemption amount is also now “portable” between spouses. It means that the first spouse to die, can transfer any unused exemption to the surviving spouse, without the need of a “credit shelter trust.”

Note that the enhanced federal exemption amount is scheduled to “sunset” in 2026, returning back down to $5.6 million (indexed for inflation).

As far as state law changes, the New York estate tax exemption amount is $5.74 million. However, that exemption isn’t portable. The estate tax exemption is phased out, if your taxable estate is 5% more than that amount. For a New York taxable estate of about $6 million, there’s no exemption and the New York estate tax is about $500,000. The New York estate tax on a $10 million taxable estate is more than $1 million. Since New York has no gift tax, lifetime gifts don’t decrease the estate tax exemption for state tax purposes. However, gifts made within three years of death, would be clawed back under a pending bill.

In New Jersey, they’ve repealed the estate tax but kept the inheritance tax. Connecticut raised its estate and gift tax exemption amount. In the state of Illinois, the estate tax exemption amount is only $4 million and isn’t portable. This makes flexibility in your estate plan very desirable. For residents in the Land of Lincoln (that’s Illinois), the estate tax savings are less dramatic, since the exemption is smaller than in New York, but the potential savings through proper planning are still major.

Another consideration to note includes the fact that surrogate’s courts and probate courts—which have always moved at a snail’s pace—have become even slower.

Some of these changes may impact your current estate plan. You may want to take advantage of the enhanced federal exemption amount, before it goes away.

Regardless of where you live, talk with an estate planning attorney in your state to find out if your state estate tax is going to take a bite out of your children’s inheritance. Are there any new tax laws or strategies that could keep more of your assets in the family?

Reference: The Wealth Advisor (June 17, 2019) “Tune-Up Your Estate Plan in Light of Changing Conditions”

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