Minnesotans who are considering their estate planning options or who have already created their estate plan should be aware of how changes to the law can impact them. While having a comprehensive estate plan is beneficial, there are always factors that should be considered as to how the document is structured. This includes knowing whether a will or a trust is preferable; if there should be a combination of several choices; and how to protect loved ones from onerous taxes after the testator has passed on. People with significant assets can benefit from the current laws and might want to alter their estate plan to reflect them as time may be limited.
In 2020, it is the second consecutive years in which inflation has raised the amount that can be exempted from the estate tax. Business owners and those with large assets can therefore shield their heirs from having to pay a massive tax bill. The amount was raised to $11.58 million for an individual. For a couple, it is $23.16 million. These changes reflect the changes to the tax laws that were passed in 2017. It is important to remember, however, that the threshold is set to expire in five years. It is possible that the exemption amounts could revert to what they were before 2018 at $5 million for individuals.
An example of a step an entrepreneur can take is to use the gift exemption. Giving gifts of up to $11.58 million while the person is alive avoids the estate tax. Another idea is to transfer assets. This can be especially wise for those who own a business that is expected to jump in value. Heirs will not be obligated to pay for the gains after the gift. Philanthropy is another alternative. A relatively under-reported benefit is that the Internal Revenue Service will not have a claw back for gifts even if the laws are changed after 2025.
Estate planning is important for everyone whether they have major assets or are of lesser means. Probate, powers of attorney, the estate tax, business concerns, charities – all are vital aspects of a fully formed and effective document. To create or alter an estate plan, legal assistance may be useful. A law firm experienced in all areas of estate planning may be able to help.
Established more than 95 years ago, Quinlivan & Hughes ranks among the oldest and largest law practices in Central Minnesota. The full-service law firm has growing legal teams in the areas of employment law, business law, government law, insurance defense, trust and estate planning, and general litigation. Learn more at Quinlivan.com.