Alert: New Estate Tax Laws and How Portability May Impact Your Beneficiaries

If you have estate planning documents that are more than a year old, you probably need to have them reviewed by an estate planning attorney. Why? Because 2 big changes (among others) were made to the estate tax laws. Here’s the scoop…

Congress set the estate tax exemption amount “permanently” at 5 million indexed for inflation. The 2014 exemption amount is $5,340,000. This means with good foundational estate planning a married couple can shelter $10,680,000 from federal estate taxes.

Most people are well below this 10 million dollar figure but that doesn’t mean there is no tax issue. Although a good estate plan should not be structured solely on tax implications (see Creative Estate Planning for Clients No Longer Subject to the Federal Estate Tax), your estate plan could be subject to unnecessary income taxes/capital gains taxes for your beneficiaries.

The reason why leads us to our second big change in the tax law; the concept of Portablity is now permanent(until Congress decides to change its mind).

In the age of “pre-portability”, estate planners traditional drafted legal documents with estate tax reduction as a primary focus regarding taxes. Given the high exemption levels, estate taxes may not be as important to most clients but now there is a potential income tax hit that your beneficiaries could take unnecessarily. The answer lies in the mechanics of portability and how it could benefit your heirs. We will discuss this issue in more detail in a later blog.

As mentioned above, if you already have estate planning documents, take the time to meet with an estate planning attorney to make any changes to how your assets are distributed, based upon on these new estate tax laws.