The New Estate Plan

Last week, Laura Saunders wrote an article in the Wall Street Journal entitled The New Rules of Estate Planning. It’s a great article, and Ms. Saunders gets down to business quickly discussing some key changes to the modern estate plan.

In the article, Saunders wrote about the fact that the federal estate tax, for most people, is now history. But that wasn’t always the case, as many middle class families nearly a decade ago rushed to their attorney to create credit shelter or A-B trusts because they were worried about the estate tax. Now, those types of trusts may actually do more harm than good. If you have an old trust like this, you must come in to our office to review it and probably update it. 

Today, I emphasize with many clients that trusts may be useful for other goals, such as asset protection for your loved ones. I also emphasize planning for long-term care costs (which, by the way, rise much faster than inflation!).

Saunders wrote about minimizing capital gains taxes, which was more difficult to do when the focus was on estate tax planning. Today, you have a choice about which assets you hold and which you gift or sell in order to take advantage of capital gains tax savings (Currently with Obamacare, capital gains taxes can be as high as 23.8%). By the way, your Traditional IRA’s do not get a step-up-in-basis, so it makes sense to withdraw from them (besides, you have to take your RMD starting at age 70 1/2). 

Gifting can still be made, but the only reasons to gift today are to preserve your estate if you think long-term care costs are in the cards for you. Otherwise, gifting doesn’t serve as much use today.

If you read an estate planning article 10 or more years ago, the contents of the article would be a LOT different, with a heavy focus on estate tax avoidance. In just 10 years, estate planning has changed significantly. That means that your plan must change with it. If you already have a plan, that’s great. However, a plan that’s more than three years old should be reviewed.

For a link to the article, click here. You must be a subscriber to the Wall Street Journal to access the article.