Changes in the tax law and its effect on legacy planning

In 2017, Congress passed legislation that made significant changes to tax law. For people in North Carolina who are creating an estate plan, the major part of that law that may be of interest is the increase in the estate and gift tax exemption to $11.2 million for individuals and $22.4 million for couples. However, this is set to expire at the end of 2025. Furthermore, while planning to save on taxes is a part of legacy planning, it should not be the first priority.

Legacy planning involves preserving a life’s work and helping loved ones achieve their goals as well. A legacy might be left behind in the form of writing, a company or some other tangible or intangible entity. However, a legacy is made up of assets, and this is why tax concerns remain an important if not the central concern in this type of planning.

People who have done their estate planning with the intention of avoiding estate tax may want to review the plan. If the value of their estate falls under the exemption amount based on the new rules, people might want to overhaul the plan. People who are creating an estate plan for the first time might want to look at how trusts can be used to achieve their aims.

There are a number of areas a person may want to discuss with an attorney regarding taxes and estate planning. First, if their estate is worth more than the exemption amount, they may still have to employ strategies in order to try to reduce taxes. If a person owns one or more businesses, this may become particularly complex. People might also want to consider tools such as trusts that can allow them to donate to charity, save on taxes and pass on assets to beneficiaries.