If anything of worth can be gleaned from the pandemic, the challenges of 2020 – and now, into 2021 – it is the realization from folks that estate planning is vital in these uncertain times. But did you know that 50 to 60 percent of people in the United States still do not have even a will, let alone a more effective Trust?
From creating wills and trusts to selecting powers of attorney and more, now is the perfect time to either initially set up your estate documents or review the plans you already have in place to make sure everything is up to date to protect your loved ones in the future. And, with potential changes to the federal estate transfer tax law for high-wealth taxpayers, now is the time to sit down with one of our Woodland Hills estate planning attorneys at the Law Offices of Andrew Cohen.
The current federal transfer tax law allows individuals to transfer $11.8 million free of federal estate and gift tax to their heirs or beneficiaries, but that is currently set to expire on Dec. 31, 2025, and decrease to approximately $5.5 million per person. It is predicted that Congress will pass new tax legislation in the next few years that will drastically decrease that exemption to between $3.5-$5 million before 2025.
Our experts at the Law Offices of Andrew Cohen will guide you through the options you have to address these potential changes to the transfer tax laws and build flexibility into your estate plan, which includes:
A trust that is created in 2021 could incorporate a provision that allows the beneficiary to disclaim some or all of the assets that were transferred to the trust when one spouse passes away. These disclaimed assets could then be transferred to an estate tax-protected trust to avoid a gift tax. To benefit from its fullest potential the disclaimer must be initiated no more than nine months after the date of death.
2. Spousal Lifetime Access Trust (SLAT)
Designed for married couples, a SLAT gives the option for transferring assets to a trust for their children. The SLAT trust will take advantage of the entire federal gift tax exemption amount of the donor before it is reduced by the potential legislation.
We know that the many details and updates to these potential new federal tax exemption laws can be daunting and that you want to make sure you are doing your best to protect the future of your loved ones. This is why one of our Woodland Hills estate planning lawyers at the Law Offices of Andrew Cohen will be by your side, guiding you through the pros and cons to determine what is best for you. Contact us for a free consultation of your case by clicking here or calling 661-481-0100.