Revising an estate plan based on new tax rules

Some people in Ohio might want to review their estate planning because there has been a change in the estate tax exemption. The exemption has been changed to more than $11 million for individuals and $22 million for couples. Therefore, people who have made provisions in an estate plan to avoid this tax might want to revisit that plan to simply allow the entire estate to go to a surviving spouse.

However, this may not always be the right choice, and there may be reasons other than avoiding estate tax to keep assets in a bypass trust or another type of trust. For example, in a blended family, a person might want to use a trust to make sure that children or other beneficiaries receive a portion of the assets. Trusts can also protect assets from creditors. Tax exemptions for generation-skipping trusts are not portable to the other spouse on death, so couples who are doing multi-generational planning should make sure their estate plans take this into account. A bypass trust may also be useful for an asset that is likely to significantly appreciate.

The estate tax exemption is due to sunset in 2026. Lifetime transfers can be used up to that point. A bypass trust may protect assets if the exemption decreases after the death of the first person.

A trust may be useful even for a person who does not have to worry about estate tax. For example, a person may have a relative with special needs. A trust can be established to pay for some of that person’s needs without affecting the person’s access to assistance. It is also one way to avoid probate and get assets to a loved one more quickly or tie distribution of assets to milestones such as reaching a certain age or educational attainment.