Many people have thought about estate planning and have taken steps to make sure that as much of their estate is passed down to their heirs as possible. At the same time, the tax laws in the United States change on a regular basis. Therefore, it is important for everyone to take steps to update their estate plans for 2020, even if they have been working hard during the past few years.
Experienced estate planning professionals and advisors are now working to update the plans for their clients. The goal of any estate planner is to make sure that as much wealth is passed down to their heirs as possible. This means shielding assets from the estate tax, which can be as high as 50 percent for every dollar that is over the exemption. The good news is that the exemption size has doubled with the updated tax code. Back in 1997, the legal limit for couples was only $600,000. Every dollar over this limit was taxed at 50 percent. Furthermore, it isn’t just bank accounts that are included in this calculation. Investment accounts, cars, houses, jewelry, and anything else of value is included in this calculation. Now, the legal limit is $22 million. This means that, for couples, every dollar under this limit is shielded from the federal estate tax.
At the same time, some states still have an estate tax. Furthermore, the estate tax is also subject to change. Therefore, it is still important for everyone to work with an estate planner to make sure that their assets are shielded. Individuals already pay tax on their assets in the form of property taxes, real estate taxes, income tax, and even capital gains tax. Because of this, many people see the estate tax as a form of double taxation. This has given rise to a host of tools that people can use to shield their assets from the estate tax. For example, life insurance trusts, credit-bypass trusts, and qualified terminable interest property trusts are popular estate planning tools that can be used to reduce the size of the estate (in the eyes of the law) and shield assets from the estate tax.
Overall, the most important part of estate planning still takes place when people are alive. It is critical for everyone to have the power of attorney forms signed for both healthcare and financial needs. This is where an estate planner can provide key assistance. Everyone wants to make sure they have control over where their money goes when they die. This is the goal of estate planning. With the changing tax code, everyone needs to make sure their plans are updated accordingly.