The Tax Cuts and Jobs Act of 2017 is sure to have some long-term impacts on American finances. Since the change is so recent, experts are still trying to dissect the implications and make predictions about financial futures. Some people claim that the raising of the estate tax threshold will lead to a reduction in charitable giving by high net worth individuals. Others say that, for estate planning purposes, some California residents may even increase their giving, even in light of the changes.
A person with a significant amount of wealth may wish to maximize the benefit of passing along the wealth to heirs, or they could also wish to have some control over what happens to the assets after he or she dies. Certain types of trusts, such as a dynasty trust, may be more helpful for this than the typical will. Another benefit of a trust over a will is that it aids in reducing estate taxes. For some California individuals, a dynasty trust can help them achieve their estate planning goals.
A good plan never hurt, and indeed it has helped many individuals go through a challenging situation more easily. Estate planning may sound like overkill to those who don't have millions to distribute after their deaths, but in fact, a good estate plan can make everything crystal clear and also reduce the amount of your assets that are lost to court costs and confusion. California residents have the ability to estate plan at any age, and they may find some good reasons for doing so.
Many individuals like to have a plan for anticipated major changes in life. For some, estate planning is important for the inevitable event of someone's passing. When creating a plan, many folks in California wonder about how estate taxes could affect them and whether proposed changes could alter existing plans.
Charitable giving can be a philanthropic and strategic move for high-asset families. While the majority of California families do not have the net worth required for estate tax, those that do will face reduction of the estate due to taxation. Effective estate planning allots for strategies for reducing estate taxes, and charitable giving is one way that families can do that.
As the old adage goes, there are only two constants in life -- death and taxes. Luckily, folks who understand this fact can look to the future and plan for both. Recent changes to the tax exempt income threshold have already helped many in California with reducing estate taxes. Strategic choices about gifting and distributing assets can help others to pay less tax.
An individual can spend one's entire life building a legacy, assuming it will ultimately be given to the family and friends that he or she loves the most. Unfortunately, assumptions and failure to maintain the details of that legacy mean that it is at risk should the person die with the wrong beneficiary designations on important life insurance documents and investments. Protecting assets includes creating a will as well as keeping important documents up to date. A recent news article shares horror stories as well as strategies for avoiding a beneficiary mix-up that people in California may find interesting.
Health Savings Accounts, or HSAs, are increasingly used in California and nationwide. At the end of 2016, there were about 20 million of these accounts in operation, which was a 20 percent rise from the year before. There are big tax benefits that may motivate some people to open an HSA as part of an estate planning program, but these are usually persons who are relatively healthy and wealthier than most.
Avoiding probate is a popular subject in California and elsewhere. It is often blogged about online and discussed in general by persons contemplating or in the process of putting together estate planning components. Some people prefer to have their heirs avoid the time-consuming and public nature of the probate process.
One important fact about federal estate taxes in California and nationwide is that a decedent has a $5.45 million gift and estate tax exemption at death. This generally excludes those in the middle class of the economy from incurring a federal estate tax, and generally eliminates the issue from their estate planning considerations. However, more and more people are facing the potential of being wealthy enough at death to want to plan correctly for the possibility of a federal estate tax at death.