There are plenty of reasons for people to get their estate planning done despite, or even because of, potential future changes from Congress.
In 2022, the federal estate and gift tax exemption is $12,060,000 per person, or double that for a married couple. That means that everyone can give away during life, or leave at death, up to $12,060,000 without incurring any federal estate or gift tax. There were proposals in 2021 to reduce that amount; so far nothing has happened. Under current law, if Congress doesn’t act between now and 2026, that number will be reduced by half. The likelihood that the exemption will be reduced, whether in 2026 or before, means that people with large estates have some motivation to use the $12,060,000 exemption while they still can by making gifts to the next generation or setting up trusts for their descendants.
Consider future value
There are other important tax benefits to getting your estate plan in order. Keep in mind that life insurance, if you own it yourself, is part of your taxable estate. Basic estate planning often includes strategies to move life insurance outside the taxable estate, for example, in an irrevocable life insurance trust, so that it passes to heirs tax free. This is something to consider if your estate, including the value of life insurance, is anywhere close to the projected 2026 estate tax exemption of approximately $6 million. Physicians who have many high-income working years ahead of them should also factor that into the likely future value of their estate. And it’s important to consider if you happen to live in one of the states that has a separate state estate tax. Some of these states have exemptions that are significantly lower than the federal exemption amount, and estate tax planning can help to avoid state and federal taxes.
Putting taxes aside, estate planning is important to make sure that assets pass to the right people in the right way. This often includes trusts for children to ensure that they don’t directly receive an inheritance before they’re mature enough to handle it. A trust allows the parent to set the age or ages at which the child has access to the assets. The parent can also determine what rules will govern how the money will be invested and spent in the meantime, as well as name a trustee who will manage the trust. Trusts that last for children over the long term can provide a measure of asset protection as well, giving them some insulation from things such as lawsuits and divorcing spouses.
Another part of estate planning for physicians is the business succession plan. If you own an interest in a practice, you should give careful thought to what would happen to that interest if you passed away. A succession plan can provide a method and ensure the funds by which one partner can buy out the interest of another. Or it can be as simple ensuring there are adequate funds for the family to make ends meet while the practice is either sold to a third party or wound down.
Website Reference : https://www.medicaleconomics.com/