Tis the Season

First off, I want to wish all my readers a Merry Christmas and a Happy and Healthy New Year. 2021 certainly was chock-full of surprises. I thought that by now we would have been through the worst of the pandemic, especially since vaccines are available. On the tax and estate planning front, concerns about increased taxes and the elimination of certain planning techniques might have occurred. So far, Congress hasn’t passed a bill on these measures, and we’re still uncertain whether they’ll be able to.

Does this mean that you should forgo estate planning? The answer to this, as you might imagine a board certified attorney to say, is that you should always make sure that your plan is up to date and that it achieves your objectives.

If you’re a new Florida resident, now is the time to update your plan to Florida law. Even if your northern attorney told you that your plan is “just fine,” I would urge you to have it reviewed. Nuances to Florida law could result in unintended consequences, both legal and tax. One of the most common areas of concern is your Florida home. Our state has very specific statutes that govern how a home can be bequeathed if you are married or if you have minor children. Failure to comply with these laws results in the state determining who inherits your home rather than your will or trust.

While the gift and estate tax exemption amount is currently $11.7 million, and slated to increase to $12.6 million on January 1st, legislation may reduce these amounts. Even if Congress can’t pass a new tax bill, the current exemptions sunset on December 31, 2025. Unless you plan to pass away before then, if your estate’s value exceeds $6.5 million, which is the amount that the exemption is expected to be, then now is the time to consider more advanced estate planning strategies beyond your revocable trust.

Income tax planning is another area that I find lacking in many estate plans. There are a variety of strategies available to mitigate the income tax burden that your beneficiaries will one day face. But those strategies need to be employed within your plan before you die. This is true especially if you own significant IRA, 401(k) or other qualified retirement accounts, annuities, or unrealized capital gains.

Florida law affords new opportunities for capital gains tax planning for married couples. We now have a community property opt-in statute. If your plan meets the statutory requirements, the surviving spouse may receive a full step up in tax cost basis at the first spouse’s death, eliminating the unrealized capital gains of your assets and accounts. Failure to comply with the statutes results in only a step up of the first decedent spouse’s assets, or for joint accounts, one-half of a step up.

Community property status is not appropriate for everyone. You should check with a qualified estate planning attorney to determine if it is right for you.

There are other reasons to review your estate plan. Don’t put it off simply because Congress can’t seem to pass a new law.

In the meantime, I wish you and yours a very happy holiday season.

© 2021 Craig R. Hersch learn more at

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