Avoid Dangerous Planning Generalizations After the New Tax Law
Toss routine planning right out the window – It’s time for clients to have their old estate plans reviewed!
Now that the status quo of tax planning has been upended by the passage of the Tax Cuts and Jobs Act of 2017, wills, trusts and portfolios are all due for a once-over and estate planning attorneys and financial advisors are bracing to make sense of some of the most sweeping tax changes in decades.
Whatever planners used to do routinely must be re-examined. Generalizations will prove to be dangerous.
1) Planners must be the catalyst
It is extremely important for Estate Planning attorneys to re-examine their clients’ existing estate planning: wills, revocable trusts, insurance plans, and more. While many clients will assume that “Gee, the exemption for a married couple is over $22 million, I don’t need to worry about estate planning,” that would be dangerous. The biggest challenge estate planners will face is getting clients to understand that a large exemption does not solve estate-planning issues.
2) Rework outdated wills
Estate planning was never just about taxes. A client can benefit from more than just a simple Will, even if they don’t think they need “Estate Tax Planning.” Wills do not include protections for later life and aging that a robust revocable trust does. Only a properly drafted trust can protect surviving spouses and children from creditors and predators.
3) Bad formulas
One of the most dangerous problems with old wills and old revocable trusts, is the formula used to fund bequests that have now been twisted by the new high estate tax exemptions. Over the years, Congress has tinkered endlessly with the estate tax. It is crucial that clients know they need to have their old plans reviewed by a professional Estate Planning Attorney. Although addressing the many what-ifs can make a client’s documents more complicated and costly, anything less is way too risky.
4) A closer look at old trusts
Every irrevocable trust should be reviewed to make sure the purpose of the original plan still makes sense. Clients should be guided to a more reasoned evaluation of what new purposes the old trust might now serve, or how the old plan can be modified.
5) Powers of attorney
Clients need to know that it’s important that they have an estate planning attorney review their durable powers of attorney, as well. Old powers of attorney might contain provisions that are not relevant under the current law or dangerous spigots for elder financial abuse.
Original article was written by Martin M. Shenkman, CPA, PFS, JD, who is a Financial Planning contributing writer and an estate planner in Fort Lee, New Jersey, and can be found at https://www.financial-planning.com/news/tax-cut-and-jobs-act-impact-on-estate-planning-tax-planning with modifications and additional information provided by Haiman Hogue founding partner, Fred O. Haiman.