Will You Need a Will in Texas if the Estate Tax is Eliminated?

Regardless of which candidate becomes president and what changes are made in coming years, there will still be a need for estate planning in Texas, and that includes regular folks as well as the ultra-wealthy.

If the U.S. federal estate tax were to be eliminated, there will still be plenty for single family offices and estate planning attorneys to do, according to a Forbes article, “If the U.S. Federal Estate Tax Goes Away, What Will Single-Family Offices Likely Do?” Wills are still going to be needed to provide direction as to how assets are to be distributed, and all estate plans will likely need to be reviewed and revised in light of changes to the law. For the single family office, there will still be much to do.

Life insurance purchased to pay estate taxes will also need to be reviewed. One way to do this is to convert permanent policies with meaningful cash values into private placement life insurance policies (PPLI).

Private placement life insurance is a variable universal life insurance policy that provides cash value appreciation based on a segregated investment account and a life insurance benefit. PPLI is designed to maximize savings and minimize the death benefit.

The investment account typically uses tax-inefficient hedge fund strategies. PPLI can be especially useful as an element of more complicated tax strategies

With advances in technology and greater efficiencies, private placement life insurance is becoming more popular for more wealthy individuals.

People who operate single-family offices are also becoming more aware of the opportunities for PPLI as part of the financial portfolios of their clients. The use of PPLI may increase quickly and considerably if these families are no longer required to keep traditional life insurance policies purchased to pay estate taxes.

Whether or not the federal estate tax is eliminated entirely, or if a new estate tax structure is created hinges on the results of the November election. The only thing that is certain is that if changes are made, estate plans will need to be reviewed and revised.

For additional information related to tax and estate planning in Houston, please visit our website.

Reference: Forbes (September 29, 2016) “If the U.S. Federal Estate Tax Goes Away, What Will Single-Family Offices Likely Do?”