What To Do While Congress Ponders Changes To Estate, Gift Taxes

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Property owners dodge some bullets in 2021. Significant estate and gift tax increases were proposed at the beginning of the year, but they have been put on the back burner. They are likely to be revised in 2022. Even if they are not, the 2017 changes are set to expire after 2025. That would cut the lifetime estate and gift tax exemption in half, along with other tax increases.

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While we wait to see what will happen to estate and gift taxes, action must be taken now. Here’s what you should do when Congress talks about your future.

Update and evaluate your financial situation. You don’t need an estate planner to complete the first step in any good estate planning.

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Compile the details of all your assets. In addition to the name and account number or description of the property, list current values ​​and how the property is owned (such as separately, jointly, or in a trust). Don’t forget assets that are not included in probate estate, such as retirement accounts, annuities, life insurance, and those held in trusts.

Also, list details of any liabilities.

Then, update your retirement plan or create at least a basic cash flow projection of expected income and expenses. You want to know how much assets you need to maintain to maintain financial security for the rest of your life. Any of the above assets can potentially be given to reduce estate and gift taxes before the effective dates of any changes in the law.

The longer you do this, the less expensive and more complete a modified estate plan will be.

Review your current plan. You’ll do it again when you meet with the estate planner. But reviewing the plan for yourself and with your spouse now will refresh your memory and possibly encourage ideas for change or improvement.

set your goals. Maybe some of your goals have changed since your latest plan was developed. Maybe your family makeup has changed. Or potential changes in the law could affect your goals.

Review advance directives and powers of attorney. Often when these documents were developed, people’s choices seemed to be automatic for you to decide. Those agents may no longer be the best fit. As part of this review you may realize that your financial and medical providers have changed and new providers require copies of updated documents.

Consider late-life and end-of-life options. Advance directives and other documents usually contain your preferences for obtaining medical care in certain situations. You may have expressed preferences about receiving care at home versus assisted living or moving to other facilities.

Your views on these issues may have changed, especially since technology, medical care, and other factors have changed. Review the choices you make in the current documents and decide if you want to make any changes. Be prepared to discuss these with your estate planner.

This is also a good time to consider or reconsider your plan to pay for any long-term care that may be needed in the future.

Discuss with family. Counselors do not agree on when family members should be brought into the planning process, but they do agree that family members should not remain in the dark. Surprises in estate planning often trigger property disputes and family disputes.

It is a good idea to have an early discussion with family members about the basics of the plan. Talking with your children about their financial situations and goals can help you make changes to your plan. Some parents are surprised to learn, for example, that their children don’t really want to inherit the vacation home and will sell it immediately. There is no point in planning how to get ownership of a vacation home shared between children when they don’t want to.

Some parents decide that it is better to give some lifelong gifts after knowing their children’s financial situations and goals.

Also, heirs should be given a good idea of ​​how likely they are to inherit or not. This information is likely to affect their own plan.

Be ready to apply. Many estate plans fail because the plans were not fully implemented. Often beneficiary designation forms are not updated for retirement accounts, life insurance and annuities. Many estate owners fail to transfer property ownership to living trusts or other vehicles.

Communicate and distribute. Some documents need to be distributed to key people. Others need to know what their role is in your estate planning and how they can obtain documents when needed.

Once the power of attorney is executed, you must distribute them to financial service providers and ensure that they are acceptable to the providers. Medical providers should be aware of this and will probably have copies of your advance directive. Some states now offer the facility of online registration of advance directives so that medical providers can find them when needed.

Don’t overreact to legislative proposals. Some are already revising their estate plans in response to proposals in Congress, and some estate planners are recommending prompt action. But most people shouldn’t take irreversible steps before they’re enacted, because proposals can’t become law or change details.


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