What if (almost) No One Pays Estate Taxes?

kimberly r. hoipkemier

Estate Planning and Estate Taxes have gone hand in hand for decades.  When a client met with an estate planning attorney, the avoidance of estate taxes at death was key to driving the format of the estate plan, and this generally meant Trusts were key to an effective estate plan.

Our current federal Estate Tax exemption is $5,490,000 per person in 2017, and is scheduled to rise to $5,600,000 in 2018.  That means an individual can pass away owning nearly $5.5 million without owing any estate taxes[1], and a married couple can double that amount and protect nearly $11 million from Estate taxes.

Under the sweeping changes to the tax code, the individual estate tax exemption will jump to $11.2 million and $22.4 million for married tax payers.  While this alone nearly eliminates all but the ultra-wealthy from worrying about Estate Taxes, the plan fully phases out the Estate tax by year 2024.  However, with relying on the total phase out may not be the best course, as a change of control in Congress before 2024 could see the phase out phased-out.

So what does this do to the thousands of estate planners who have spent their careers developing creative strategies to avoid estate taxes?  For one thing, it allows us to step back, regroup and recall the real reasons a family engages in estate planning:  to protect and plan for their family and future generations at death.  Finally, we are not slaves to the invisible hand that comes knocking for taxes right after a loved one dies.  But, this does not mean we no longer need the Trusts that formed the basis of so many plans.

Trusts provide so much more than estate tax benefits.  Trusts allow for the Grantor/Decedent/Parent to specify and allocate distributions for their children, grandchildren and even great-grandchildren.  Trusts name and appoint decision makers to make those complicated financial decisions.  Trust-owned assets avoid probate and estate taxes at the death of the beneficiary if properly structured.  And, trusts provide protection of the assets passed down at death, protection from judgment creditors, divorcing spouses and bankruptcy.

Alas, taxes are not gone from the estate planner’s discussions either.  Income taxes are just as important to consider.  We can engage in basis planning maneuvers’ in order to take advantage of the step up in basis of assets at death among other things.

We have the opportunity to discuss each of these Trust attributes in turn and carefully craft a trust that best suits the family’s needs and best protects the family’s assets.  Contact us for assistance with your estate plan at 404-255-7400 or info@hoffmanestatelaw.com.

[1] For Georgia residents as Georgia does not have a state estate tax.