Every year, Congress passes new legislation that impacts Americans and their daily lives. One of these aspects is when Congress passes bills in estate planning law—this changes Texan’s strategies for planning for the future and what type of taxes they will have to play. Even for those bills that are not ultimately passed, it is critical to understand what these laws would do to estate plans, as they—or similar legislation—may be passed in the future. Below are various proposals made by Congress, their effect if passed, and steps Texans should take with their estate plan—whether these ideas become law or not.
What Are Some Current Federal Proposals to Estate Law?
In the past year, Congresspeople have introduced several pieces of legislation that would have significantly altered the way people create estate plans. However, these proposals were not passed.
One such piece of legislation would have reduced the estate and gift tax exemption from the current amount, $12.06 million per person, to $6.85 million per person. This means if an individual’s estate were valued at over $6.85 million, they would have to pay a hefty estate tax fee before their remaining assets would be passed on to beneficiaries. Other proposals include raising the top income tax rates, eliminating the use of irrevocable trusts, and changing the structure of capital gains taxes.
Many Texans assume that these potential changes would not impact their lives or their estate plan. However, this is not necessarily the case. These bills, if passed, would have massive ramifications for anyone with assets and an estate plan in place.
What Steps Should I Take Now?
Many Texans wonder what they should do now before this legislation is potentially passed and turned into law. One piece of advice that estate planning attorneys are giving their clients is to create an irrevocable life insurance trust. In doing so, it removes the life insurance policy from the taxable estate—making it less likely an individual will reach the tax exemption threshold. Creating an irrevocable life insurance trust allows the policyholder to gift the policy to another individual on their death. When the person passes away, the trust receives the insurance proceeds before it is gifted to the beneficiary. Taking this step may seem complicated, but it is one way to plan ahead, even if the estate tax limit is reduced in the future.
Keeping up to date on all the federal and state estate law proposals can be difficult. Because of this, individuals should reach out to an experienced estate planning attorney who can help them navigate the legislation and determine which actions they should take.
Contact a Houston Estate Planning Attorney
If you or a loved one is worried about how federal laws will impact their estate plan, contact the Houston estate planning attorneys at McCulloch & Miller, PLLC. Our attorneys are not only up to date on Texas laws but also federal laws, so they can advise their clients on the best estate planning strategies. While constant changes to estate law may seem difficult to comprehend, we are here to help. To schedule a free, initial consultation, give us a call today at 713-333-8900.