Wednesday, April 3, 2019

Estate Planning Then and Now

With close to a decade of experience in the field of financial services, seasoned businessman Brad Liebe established KK&B Financial Services for Seniors, where he also serves as president. In this capacity, Brad Liebe provides financial consulting and estate planning for seniors.

Twenty years ago, the individual federal estate tax exemption was at $600,000 and the estate tax rate was at 55 percent. Couples could opt to combine their trusts and, in turn, enjoy twice the federal estate tax exemption - that is, $1.2 million. By simply owning a home, some investments, and life insurance, one could accumulate an estate. Also, over the last two decades, passing assets to heirs did not require the intervention of the probate court, which happens when the deceased family member leaves a last will and testament. Instead, the revocable living trust has been preferred, a document referred to as a probate-avoidance tool.

Fast forward twenty years to the present time - the individual federal estate tax exemption is now $5.43 million. Couples can still choose to double the exemption for a total of $10.68 million. Plus, the estate tax rate dropped to 40 percent. Probate-avoidance tools such as payable-on-death bank accounts may also be established.

Because of these current trends, estate planners tend to focus on more relevant concerns. One is the increase in the income tax rate from 35 percent to 43.4 percent, which tends to negate the drop in the estate tax rate from 55 percent to 40 percent. Also, the long-term capital gains tax rate increased to 23.8 percent from 15 percent. Because of these changes, estate planners are looking for new ways to minimize income taxes as part of their estate planning strategies.