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The updated 2018 tax bill signed into law in December has many people worried about how the changes will impact them. Among a host of changes, the bill increases the standard deduction, expands the Child Tax Credit, removes the “marriage penalty” for most individuals, limits the deduction for state and local taxes, and changes the rules on deducting mortgage interest, charitable donations, and medical expenses. The new tax bill also lowers tax rates for most corporations and for many individuals, and changes how pass-through income earned by owners of sole proprietorships, LLCs, and S corporations, is handled (different limits apply to professional services business owners).

In terms of estate planning, the estate tax in 2017 was set at $5.6 million (lifetime limit) for individuals and $11.2 million for married couples; under the new tax law, this has doubled to $11.2 for individuals and $22.4 million for married couples. A much smaller number of people will now pay estate tax on money and assets they inherit. By contrast, those high wealth individuals and couples may wish to pursue aggressive planning opportunities by making tax-free gifts to heirs now in the event the law ever sunsets in the future.

If you had previously structured your estate plans to minimize taxes paid by your heirs due to estate tax, now would be a good time to sit down with your estate planning attorney and review your plans. It may be possible to adjust or eliminate counterproductive measures included in your old estate plan based on the new tax laws. For example, a typical estate plan for a married couple whose estate exceeded $11.2 million may have created and provided for funding a trust for the benefit of a surviving spouse, with a trustee and other administrative requirements which are now unnecessary since a married couple can pass $22.4 million to their heirs free of estate tax.

From a business planning perspective, if you are starting a new business, you will want to look closely at which business structure will provide you the most benefit – from legal and cost/benefit perspectives, as well as from a tax viewpoint.

Talk with your attorney (and tax advisor) about how the new tax law may impact you and what changes you may wish to make in your planning for 2018 and future years. Even if your current estate is below the 2017 limits, if you have not reviewed your estate and business succession plans in the past two or three years, it is a good idea to do so now. Contact us today to schedule an appointment with an estate planning attorney.