Critical Estate Planning Strategies Before the Election Approaches
Greetings,
With the upcoming election, it’s a great time to reassess your estate plan. While the election’s outcome could bring changes to tax laws, it's crucial to have a plan that’s current and reflects your financial goals, regardless of political shifts. Here are some key strategies to consider before the election:
Don’t Delay Setting Up Your Estate Plan
No matter your income level, having an estate plan is essential. If you’ve been postponing it, now is the time to act. A solid plan ensures your assets are distributed according to your wishes and provides for your loved ones in case of unexpected events. If you already have a plan, review it to make sure it’s up-to-date and avoids common estate planning mistakes.
Election and Estate Tax Changes
Current tax laws, under the 2017 Tax Cuts and Jobs Act (TCJA), provide an estate tax exemption of $13.61 million per individual and $27.22 million for married couples. However, after 2025, this exemption may drop to around $7.5 million per individual, subjecting more estates to federal estate taxes. Future election outcomes could lead to further adjustments, so staying aware of potential changes is key.
Consider Strategic Gifting
To reduce future estate tax liabilities, consider making substantial gifts before the election or year’s end. The IRS has clarified that large gifts made under current exemptions won’t be "clawed back" under future tax laws. Even if you don’t gift up to the full exemption, transferring appreciating assets—like business interests—can help minimize future estate taxes.
The Role of Trusts
Trusts can provide flexibility and protection in estate planning. Spousal Lifetime Access Trusts (SLATs) allow you to transfer assets for your spouse and descendants while maintaining some flexibility. Dynasty trusts, which last for generations, can help shield assets from estate, gift, and generation-skipping taxes.
Review Life Insurance
Life insurance plays a critical role in covering future tax obligations. If held in an irrevocable trust, life insurance proceeds can avoid estate taxes. However, with potential changes to estate tax exemptions, it’s worth reassessing your coverage to ensure it meets future needs.
Regularly Review and Update Documents
Estate plans should evolve as your personal and financial circumstances change. Beyond potential tax law shifts, life events like births, deaths, marriages, and divorces also require regular updates to your plan.
Taking these steps now can help ensure your estate plan is effective and ready for whatever changes may come after the election.
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