There’s a lot of buzz lately about federal estate tax. Currently, we can each pass down $11,580,000 to the next generation free of estate tax. This tax exemption increases annually with inflation, but it will be cut by more than half at the end of 2025 unless Congress takes steps to extend it. Further, if political control in Washington changes following the election on November 3, the exemption may be reduced sooner and by an even larger percentage.
So, what does this mean for you? If you are single and have significant assets, it may mean that you consider transferring some of your wealth through means other than your will and basic revocable living trust. Such transfers can include, for example, lifetime gifting, charitable trusts or other gift trusts, donor advised funds, and charitable gifts done through your will or revocable living trust.
All these tools are also available if you are married, plus you can double what you and your spouse can pass down free of estate tax simply by setting up separate revocable living trusts. If you already have separate trusts but they are several years old, now is the time to have them reviewed to ensure that they are appropriately flexible, and that the formula clauses that kick in upon the first spouse’s death do not create heartbreak for the surviving spouse due to tax law changes that took effect after your trusts were drafted.
If you’d like to schedule a checkup with one of our estate planning attorneys, please call our office at (248) 477-6300 to set an appointment.
© 2021 Wright Beamer, PLC