The COVID-19 pandemic has created many estate planning issues, the first and foremost of which is, do you have an estate plan? If you do not have an estate plan, state law will determine who receives your property, which may not necessarily be the individuals to whom you wish it to go. Also, without an estate plan and a revocable living trust, your estate may be subject to probate which will cause your heirs to incur additional legal fees and expend time which could have otherwise been avoided. Probate is the legal process which involves the institution of a probate proceeding in court in order to cause the property of a deceased person to be transferred to the person’s heirs. This can be avoided with a proper estate plan and a revocable living trust.
The next issue to address is whether your estate is subject to estate tax. Currently, only the largest of estates are subject to federal estate tax. In 2020, there is an exemption from federal estate tax of $11.58 million per person, which is adjusted for inflation annually. As a result a married couple would not currently be subject to federal estate tax unless their combined estates exceed $23.16 million because they would each have the exemption of $11.58 million. However, if there are no changes in the tax law, in 2026 the exemption as adjusted for inflation will drop to approximately $6 million per person, and even if the law does change there is no guarantee what the minimum amount of the exemption will be in the future. Given the uncertainty of the tax law, many find themselves in the position of not knowing whether or not their estate will be subject to federal estate, which is significant because the federal estate tax is equal to 40% of the portion of the estate that exceeds the exemption.
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