Congress has taken recent action to increase the estate tax exemption to $5.45 million. Married couples can double that amount to $10.9 million. This means that any wealth that has been accumulated below that threshold will not incur estate tax when the time comes to pass those assets down to the next generation. Any assets exceeding that amount are subject to estate taxes, which can drastically reduce the amount of wealth left for one's heirs. In order to avoid excessive taxation, it is necessary for Tennessee residents to create a comprehensive estate planning package.
Just as there are no two families that are exactly alike, there are also no two sets of estate plans that are identical. Fortunately, an array of options exist for individuals and families. Regardless of whether the goal is to hand down wealth to one's children or set up a trust to care for a beloved cat, there is a solution available.
For many families, trusts are the go-to option in protecting wealth from excessive estate taxation. Trusts essentially allow individuals to give assets to the trust itself, which then becomes the legal owner of those assets. There are ways to ensure that the original holder of that wealth is able to maintain control over the trust, but the wealth held within is no longer the property of the person who created the vehicle.
That means that the wealth is not only removed from the taxable estate, it is also protected from other forms of loss. Wealth held in trust is not subject to loss from divorce, bankruptcy, liens or court judgments. It is protected to the highest possible degree, and it provides benefits to those parties listed as beneficiaries. In this way, trusts are among the most highly regarded estate planning options available to Tennessee residents.
Source: The National Law Review, "Recent Changes in Estate Planning Laws May Be Cause for Review of Your Estate Plan", Les Raatz and Robin L. Miskell, May 5, 2016