Introduction – Non-Tax Reasons for Estate Planning
The Tax Cuts and Jobs Act doubled the federal estate tax exemption to over $22 million for married couples. Some are now asking: “What’s the point of estate planning?” Minimizing estate taxes should be a goal for high net worth clients. Yet, it’s not the only reason to plan. In fact, estate planning is more important now than ever. Here are three reasons why:
Taking Advantage of New Business Provisions
The Tax Cuts and Jobs Act significantly altered business taxation. First, the legislation lowered the corporate tax rate to 21%. Second, it created new, favorable treatment for pass-through entities. This includes partnerships and S corporations. Given these provisions, business owners should reevaluate how their companies are structured. Changes could result in a lower tax bill.
Preparing for the Possibility of Incapacity
Medical experts predict that the incidence of Alzheimer’s and dementia will triple by 2050. Thus, it makes sense to prepare. Durable powers of attorney, Advance Directives for Health Care (also known as a living will) and trusts allow loved ones to make decisions for you in the event of incapacity.
Estate planning is about your legacy. You have worked hard for your money. Nevertheless, in the absence of proper planning, your beneficiaries’ inheritances can be lost to creditors, divorcing spouses or even the government. Fortunately, trusts can protect that money by controlling the timing and manner of distributions.
Don’t let the increased federal estate tax exemption give you a false sense of security. Estate is still something everybody should do. By planning properly, you can minimize income taxes, plan for incapacity and preserve your legacy for generations to come.