As many of you may know, administrations come and go, and when they do, it is prime time for law changes. Some of these changes do not or only minimally affect estate planning, but others, like the recently proposed federal estate and gift tax changes, have the potential to dramatically affect estate tax planning. This is one of the many reasons we have a client care program designed to take care of our families—so that when the law changes, your plan can change with it.
At the moment, there are proposed changes in the law that may result in the $11.7 million estate and gift tax exemptions being reduced to $3.5 million for the estate and $1 million for gift taxes. Since Massachusetts currently has no gift tax, our planning for most of our families has been to make large gifts of up to $11.7 million to immediately lower the Massachusetts estate tax. If, in fact, the new federal exemption is lowered to $1 million, we will be prevented from making those large gifts since that would now cause a federal gift tax of as much as 40%. So, under the current law, we could make an $11.7 million gift, which could result in a Massachusetts estate tax savings of approx. $1.35 million (if not gifted this money would have caused a Massachusetts estate tax, but since we could make that transfer just prior to death with no federal gift tax liability, we are able to reduce the MA estate tax by that amount). If the gift tax exemption goes down to $1 million, any gifts of over $1 million would be subject to potentially a 40% tax.
In light of these potential changes, it is now urgent to discuss gifting strategies with a knowledgeable estate planning attorney, to take advantage of the current high exemptions that will probably be reduced in the next year, or over the next several years. If the law changes go into effect, it will be too late to take advantage of the current gifting strategies. This is true regardless of whether you already have an existing estate plan in place or if you still need to set up a plan.
One technique we can use is a spousal access trust where spouses can gift to each other and essentially retain a certain extent of control over the assets. The best planning strategy will vary depending on a variety of factors such as your specific family situation, assets, and desired level of control, among others. This makes it important to speak with a knowledgeable estate planning attorney, to design the plan that is best for your individual situation.
Here at Family Estate Planning Law Group, we can help guide you through creating a plan tailored to your unique needs and situation, designed to carry out your wishes and take care of your family. Our ongoing care program helps to ensure that as your life or the law changes, your plan changes with it, allowing your plan to take care of your family when it matters most.
To learn more about how we can help you and your family take advantage of this window for gifting strategies or about how we can help you to have peace of mind through holistic estate planning, visit our website, explore our blog, and schedule your complimentary consultation today!