The federal tax bill passed in Dec. 2017 could have impacts on estate planning for people in Ohio and across the United States. There are several changes that can affect people’s choices about how to plan for their property after death.
Some aspects of the tax system remain the same; estate, gift and generation-skipping transfer taxes remain in place and carry a 40 percent rate. However, the unified exemption has been doubled from $5 million to $10 million and is indexed to inflation. This increased exemption will remain in place until it sunsets in 2026. In addition, the concept of portability remains in place, so the remainder of the lifetime exemption that is unused at death can be credited to their surviving spouse for use in their own estate.
For many married couples, this could encourage them to simply leave their estates to one another. However, in other circumstances, people may want more complex plans to fit their own unique circumstances. For example, blended families may want to use a bypass or QTIP trust to make sure that each spouse’s children remain beneficiaries of the family’s estate. These types of trusts can pass property to the surviving spouse while still directing the future disbursement of property after the survivor passes away. These trusts can also help to avoid potential issues with creditors of the surviving spouse.
People with estate plans in place prior to the tax law changes may wish to review those plans. Some family trusts use formulas based on previous exemption amounts to create a bypass trust; it can be important to revise those formulas in order to reflect the outcome that is desired according to the current tax laws. An estate planning lawyer may help people review their estate plans and develop a comprehensive system of trusts and documents to protect their assets.