With the $5 million exemption level for federal estate taxes now permanent, some individuals and families with wealth under that threshold may believe they do not need estate planning.

But taxes are just one part of estate planning.

Here are five estate-planning topics to share with investors with wealth and estates of any size:

1. Review estate planning documents and strategies.

Individuals and families who are not concerned about estate taxes still need to plan for an orderly transfer of assets in the future, or for unforeseen circumstances, such as becoming incapacitated due to illness or injury. Strategies to review include beneficiary designations on retirement accounts and insurance contracts, wills, powers of attorney, health-care directives, and revocable trusts.

2. Plan for potential state estate taxes.

Many states have estate or inheritance taxes. A number of states have “decoupled” from the federal estate tax system, resulting in different tax rates or exemption amounts. Taxpayers need to be aware of any state exemption levels. It is important to consult with an attorney on specific state law and options to mitigate these state taxes.

3. Consider transferring wealth during your lifetime.

The unified lifetime exemption amount ($5,450,000 for 2016) for gifts and estates provides flexibility for taxpayers to decide whether to transfer wealth while living or at death. Lifetime gifting shelters appreciation of assets post-gift from potential estate taxes, helps heirs now, and utilizes certain valuation discounts available through strategies such as family limited partnerships. Transferring assets at death allows individuals to maintain control of property while living, and helps heirs benefit from step-up in cost basis at death.

4. Consult with an attorney about complex wealth transfer strategies.

Individuals and families with significant wealth, especially those with large real estate holdings or well-established businesses, may benefit from more complicated wealth transfer strategies. These strategies include grantor trusts, family limited partnerships, and dynasty trusts.

5. Evaluate a Credit Shelter Trust (CST).

A properly designed CST will shelter appreciation of assets from the estate tax after the death of the first spouse. However, since the portability provision, which allows a surviving spouse to utilize the unused exemption amount of a deceased spouse, is now permanent, is trust planning still necessary? There are some benefits for using a CST including protection of assets from potential creditors, spendthrift protection for trust beneficiaries, planning for state death taxes, and preserving the generation-skipping exemption. There are costs and effort required to set up the trust that are not associated with using the portability provision. Also, assets transferred to a trust do not receive a “step-up” in cost basis at the death of the second spouse.

Before choosing investment strategies that may impact an individual’s overall financial plan, it is important to meet with a qualified tax or legal professional and a financial advisor. For more details and ideas, read “Ten income and estate planning strategies for 2016.”


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