Revising Estate Plans for the Right Reasons

By Christopher D. Wright  |  August 4, 2021

If I could convey to you the concern and urgency in the voices of many of my clients at times it might sound something like this, “Are changes coming that will reduce the lifetime estate tax exemption?  Do I need to do something about my estate plan right now?”

When I hear that on my calls, here’s what I tell them: “Yes, changes in legislation affecting the estate tax exemption will have an impact, but at this time there is no actual legislation pending, so we still have time to review your current estate plan.” 

What I try to instill in my clients is that it’s always important to periodically review their estate plans, not just in crisis mode because of potential legislative changes. After all, updates based on lifestyle changes, asset reallocation, births, deaths and new grandchildren are all part of life. Estate plans are not static, but while future estate tax legislation should be kept in mind, it should not be the sole reason to take a look at your estate plan.

Why?  Well, from a legislative point of view, there is apparently little impetus to drive any tax rate change legislation right now – neither in Congress nor from the White House.

But, more importantly, there is exemption legislation that most assuredly will have an impact, and that’s because there are sunset provisions built into the existing 2017 Tax Cuts and Jobs Act, (that increased the estate tax exemption in 2021 to $11.7million), coming our way at the end of 2025.  Unless changed, the lifetime exemption, known as the ‘applicable exclusion amount,’ will drop to $5 million. Now, that’s something that can be planned for!

However, even this is not an immediate crisis. Rather, it is a good decision-making starting point. I caution clients not to be wrapped up by the gloom of losing the $11.7 million exemption, or even worse, to take unnecessary steps and create wild new gifting schemes. This could ultimately lead to plans they no longer want, or need, and find hard to get rid of, and it is entirely avoidable.

While it’s true that when we advise clients on their plans, we do take tax rates and exemption caps into account. However, changing an estate plan based solely or mostly on tax concerns is not the way to go. There are many other aspects to an estate plan that are equally as important – like building wealth, mitigating risk, investing in a business, educating family members on the uses of wealth, philanthropy, legacy…the list goes on.

In future blogs I’ll get more specific and hope to touch on planning tools individuals can consider like life insurance trusts, and grantor versus non-grantor trusts. But for now, let me close by saying that living, breathing people should devise their estate plans with real intent and purpose while they are still alive, and rely on their executors to pay their estate taxes after they are dead. After all, which is the more important element to concentrate on?

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About Christopher D. Wright

Christopher D. Wright, JD, CPA, Partner in the Private Client Services Group at Marks Paneth LLP, focuses on estate planning and gift, estate and trust taxation. With over 30 years of experience in accounting, tax and nonprofit organizations, Mr. Wright is adept at working with clients and their professional advisors to assist in developing estate plans that provide both estate tax savings and efficient transfer of assets to the next generation and to charitable organizations.... READ MORE +

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