How to estate plan after the tax law change

The Tax Cuts and Jobs Act (TCJA) will likely change the way that North Carolina residents approach estate planning. The current generation-skipping trust (GST) and estate tax exemption is $11.18 million as of the first day of 2018. That amount doubles for married couples who choose to invoke portability, and it may increase based on inflation. However, as it currently stands, the increased exemption will sunset in 2026.

At that time, the exemption will revert to 2017 levels with adjustments for inflation if no changes are made. Regardless of what happens, it may be a good idea to gift assets to a trust. This allows the asset to be shielded from creditors while also providing the current owner more control over what happens to it. If a beneficiary is gifted an asset outright, he or she is considered to be in control of it. However, it may also allow creditors to make a claim against it in certain circumstances.

Most people will be best served by creating an estate plan that accounts for income as opposed to transfer taxes. However, it will also benefit an individual to create a plan that works to avoid probate while also providing for children with special needs if they exist. Individuals should also be sure to plan for what will happen if they become incapacitated.

An estate plan may help a person during life and after death. Durable powers of attorney and health care proxies may make it possible to ensure that a person’s bills are paid and medical wishes are met if he or she is incapacitated. The use of a trust may make it possible to transfer assets in an orderly manner after a person passes without the need to go through probate.