Changes to the DC Federal Estate Tax System
It is important to pay attention to the changes to the DC federal estate tax system to know how they affect you. Changes to the system can affect how your assets can be distributed following your death. Therefore, it is important to bring any questions about the federal tax system and how it affects your estate to a knowledgeable attorney. A well-versed attorney can help you create a plan that allows you to distribute as much of your estate as possible to your beneficiaries.
Changes to the Federal Estate Tax System
Over the past ten years, the federal estate tax exemption has changed quite a bit. The Economic Growth and Tax Reconciliation Relief Act of 2001 (EGTRRA) tax reform ended in 2011, so there was a time when estate planners were unsure of what would happen to the estate tax system. In general, the estate tax exemption has been increasing. In 2013, it increased to five million indexed for inflation. In 2018, it increased again to 11.2 million.
It should be noted that the current law is temporary. The 2013 reform was for a permanent law, however, the 2018 law is temporary and is slated to expire if Congress does not take action by 2025. If congress does not take any action, it will revert to the 2013 law. An attorney can further explain these changes and how they may affect a person’s estate.
Effects of Changes to the System
In general, the changes to the federal estate tax system have been relatively neutral for a large majority of DC residents. In general, the 5.6 million exemption only affected about 0.02 percent of the country. Now with the current exemption being so high, 11.4 million, it really only affects 0.01 percent of the country. The general concept has been that if someone is below the federal estate tax exemption now, they will continue to stay below the exemption amount unless they have a large liquidity event or a sudden increase in assets. However, because the exemptions have gone so high, individuals can now pass on a larger amount of assets estate tax-free.
Ask an Attorney About Changes to the DC Federal Estate Tax System
It is important to work with an attorney who has experience preparing estate tax returns. Not all attorneys go through the actual process of preparing estate tax returns at death. However, actually going through the process can help an attorney navigate the planning prior to death. They have an understanding of what the calculations look like, the information that is being collected, and can work towards collecting that information and organizing the estate in such a way to make the filing of an estate tax return easier at the individual’s death.
Most of the planning, if not all of the planning to minimize estate taxes, must be done while an individual is still alive. Therefore, it is important to work with an attorney who has an eye towards evaluating their client’s current estate for any estate tax exposure. Call today to discuss changes to the DC federal estate tax system.