It’s a fair question. And like most things in the tax and legal world, the answer is… it depends. But here’s the short version: Yes—estate planning is still very much necessary. It just may look a little different than it did a year or two ago.

One of the biggest concerns in recent years was that certain tax laws were set to “sunset” (expire), which could have significantly reduced how much wealth a person could pass on tax-free.

OBBBA largely extends those provisions, meaning:

• The federal estate tax exemption remains historically high; currently $15 million per person (which is $30 million for married couples)
• The concept of a step-up in basis at death remains intact (which can reduce capital gains taxes for heirs)
• Many income tax rates remain lower than pre-2018 levels

At first glance, that might sound like a reason to put planning on hold, but remember estate planning is flexible. Doing a plan now allows you to make changes as time goes on, and ensures your estate is ready for whatever law changes come to light.

After OBBBA, there may be less urgency for estate planning, but it doesn’t mean less planning altogether. With more stability in the law, at least in the next 3-4 years, we have the ability to plan more thoughtfully – and that’s a good thing. 

Instead of rushing into decisions, we can focus on building a plan that:

• Adapts as your life evolves
• Balances tax efficiency with flexibility
• Works not just today, but years down the road

There was also a quiet shift in focus post-OBBBA. While estate tax rules stayed largely the same, income tax planning has now taken center stage.

There are a couple of reasons for this shift. First, certain types of trusts reach the highest income tax brackets much faster than individuals do. That means how income is handled inside of those trusts can have a significant impact over time. 

Additionally, OBBBA extended State and Local Tax (“SALT”) deductions that allow particularly high-income individuals to deduct more on their taxes, with the proper trust planning in place. Similarly, there are capital gains tax considerations and healthcare-related income thresholds that make income tax planning more relevant than this time last year.

Estate planning today isn’t just about what happens when you pass away. It’s about making smart financial decisions throughout your lifetime.

If you already have an estate plan in place, this is a great time to review and update it, to make sure it’s still achieving your goals and working the way you intended it to. If you don’t yet have a plan, it’s still one of the most important steps you can take to protect your family and your legacy.

Either way, here are a few practical takeaways:

• Plans should evolve. Changes in tax laws are just one reason to revisit your plan regularly. Life changes (marriage, children, retirement, new assets) are just as important.
• Flexibility is key. Modern estate planning often includes tools that allow adjustments as laws and circumstances change.
• It’s not just about taxes. A good plan also addresses who will make decisions for you, how your assets will be managed, and how your loved ones will be cared for.

The new law didn’t eliminate the need for estate planning, it just shifted the focus. If anything, it gives us an opportunity to be more thoughtful, more strategic, and more proactive. Remember that estate planning isn’t a one-time event; rather an ongoing process that grows and adjusts as you (and your family) do.

The post What the One Big Beautiful Bill Act Means for Your Estate Plan appeared first on Desert Law Group | Kimberly T. Lee.

Portability allows a surviving spouse to claim the unused portion of their deceased spouse’s federal estate tax exemption. Currently, the federal estate tax exemption is quite generous—$13.99 million per person in 2025. That means that an individual can pass up to that amount to heirs without paying federal estate tax. With portability, a married couple can potentially double that exemption to nearly $28 million.

However, portability isn’t automatic. It’s a post-death election—meaning that after the first spouse dies, the estate’s executor must file a federal estate tax return (Form 706) to elect portability and preserve any unused exemption for the surviving spouse. This is required even if the estate itself isn’t large enough to owe any estate tax.

So why does this matter a little bit extra right now?

Under current law, the estate tax exemption is scheduled to sunset at the end of 2025, dropping back to around $7 million per person (adjusted for inflation). Whether Congress will act to extend the current higher limits is uncertain. This makes portability even more valuable: by capturing the unused exemption now, a surviving spouse may be able to preserve that higher amount—even if the exemption is lower when they pass away.

While portability can be a helpful safety net, it’s not always the best solution for every family. Plus, one spouse has to die in order to take advantage of portability so timeliness cannot be controlled. Here are a few key limitations:

• Post-Death Election: As mentioned, portability must be elected on a timely filed estate tax return, typically within nine months of the first spouse’s death (with extensions available). Miss that deadline, and the exemption is lost.

• GST Tax: Portability doesn’t apply to the generation-skipping transfer (GST) tax exemption, which means it won’t help if you want to plan for grandchildren or further generations.

• State Estate Taxes: Some states impose their own estate taxes and do not allow portability, which could create a tax liability even if the federal estate tax is avoided.

While portability is a useful tool, it’s not the only one in the toolbox. Lifetime gifts, irrevocable trusts, charitable giving, and other planning strategies can help reduce the size of your taxable estate—sometimes more efficiently than relying on portability alone.

Portability offers a valuable opportunity to double up on estate tax exemptions and provide significant tax savings for your family. But it’s important to act thoughtfully—and promptly—to ensure it’s preserved. Given the uncertainty about whether the current high exemptions will continue beyond 2025, now is an especially good time to review your estate plan and make sure you’re not missing out on this key benefit.

The post The Role of Portability in Estate Tax Planning appeared first on Desert Law Group | Kimberly T. Lee.

For a married couple, the combined exemption increases to nearly $11 million, notes a story in the Wall Street Journal.

The annual gift exclusion, however, will remain at $14,000 per recipient in 2015, the story points out. This is the amount that may be given tax-free to any individual. For married couples, they can combine the exemption and make a gift of $28,000 per recipient without using up their lifetime exemption.

With the now large federal exemption limit, few estates are expected to owe taxes this year. In fact, only about 3,700 estates, or just over 1 percent of the total, will owe estate taxes to the federal government.

As a result, estate planning strategies are shifting to ways to avoid state estate taxes and capital gains taxes, as well as making sure the clients’ personal goals and objectives are met. It is important to review your planning in light of the higher exemption. Please contact us to review your planning and get a head start for the new year!

The post IRS Increases Estate Tax Exemption for 2015 appeared first on Desert Law Group | Kimberly T. Lee.

Tax (Photo credit: 401(K) 2013)

Most estates are entirely exempt from estate tax. There is a $5,340,000 exemption from federal estate tax, meaning that estates valued at up to that amount pay nothing. This number is doubled for married couples provided they have an effective estate plan or take the proper steps to preserve the credits. As a result, only 0.14 percent of estates pay any federal estate tax at all. As to the State estate tax, the majority of state governments, including that of California, do not collect a separate state estate tax at all.

Another method for handle estate tax is purchasing a life insurance policy. Life insurance premiums can add up and become expensive for older individuals, but they are generally considerably cheaper than estate tax. Especially with proper planning, the death benefits would be free from any estate tax.

A more altruistic method to avoid estate tax is to set up a charitable remainder unit trust. The trust will make payments to you during your lifetime. When you pass away, the remainder will be donated to the charity tax free. Similarly, a charitable lead trust provides income to the charity during your lifetime. When you pass away, the remainder of the trust assets will be passed on to your beneficiary.

Additional information on the federal estate tax can be found on the IRS website.

The post How Much Estate Tax Will I Pay? appeared first on Desert Law Group | Kimberly T. Lee.

Estate planning is critical to everyday living for adults over the age of 18, and should be one of the priorities regardless of your age or marital status. If you have not yet planned your estate, we encourage you to do so right away. It’s important to prepare for the unexpected. Remember that ole saying, “tomorrow is not promised?” If you think about it, what would happen to your children, your home, and all you have worked for in the event of your unexpected death or disability if you don’t have an estate plan in place?  Let’s go over the basic estate planning that everyone should consider.

–A Will to establish what would happen to your assets. It also names the guardian for your children. Dying without a will is called dying “intestate,” and gives you no voice. It can be costly to your heirs and can bring with it issues such as family dissension and probate court intervention. Even if you have a trust, you still need to take care of any holdings outside of that trust when you die.

–A Durable Financial Power of Attorney to handle your financial affairs in case of incapacity.

-A Healthcare Directive to specify the measures that can or cannot be taken to sustain life, and to make medical decisions for you in the event you are unable to do so.

Depending on your individual circumstances, here are some additional areas of estate planning you might wish to consider:

-A Revocable Living Trust. If you hold property in a well crafted living trust, your survivors won’t have to go through the probate proceedings, which can be a very lengthy, stressful, and expensive process.

-Planning For The inheritance of Your Children. It is always wise to name an adult to manage any money and property your minor children may inherit from you.

-File Beneficiary Forms. Appointing a beneficiary for all bank and retirement accounts make those accounts automatically payable at death to your beneficiary, thus bypassing the probate process.

 -Secure life Insurance. If you have children, own a house or have substantial debt or estate tax, life insurance may be a great choice. For example, in addition to helping to support the minor children, life insurance can help provide immediate cash at death. Insurance proceeds are also a good source for paying your debts, funeral expenses and income or estate taxes.

-Understand Estate Taxes. Due to the increase in the amount of exemption amount, most estates will not owe federal estate taxes, because this tax is only imposed on persons whose taxable estate is worth more than 5.25 million (for 2013). For deaths occurring in the year 2012, the exempt amount is 5.12 million. Married couples can transfer up to two times the exempt amount tax-free.  Also, property left to a spouse (must be U.S. citizen) or tax exempt charity is not subject to the estate tax.

-Cover Funeral Expenses. An account can be established at your bank where funds can be deposited to pay for funeral expenses.

-Business Protection.  If you are a sole proprietor, setting up a successor plan is crucial. If you are in a business partnership, you should consider creating

If you don’t have an estate plan, or have an existing estate plan that needs to be reviewed and updated, please contact our office and we would welcome the opportunity to assist you.

The post The Right Time for Estate Planning appeared first on Desert Law Group | Kimberly T. Lee.

New York City Pride March 2013: Edith Windsor (Photo credit: FreeVerse Photography)

As explained in this recent article, one of the biggest estate benefits to come from the recognition of same-sex couples is the ability to transfer as much assets as they wish to each other, either during life or death, without having to pay any federal estate or gift tax. Prior to this 5-4 ruling from the Supreme Court, this tax benefit was unavailable for same-sex couples because section 3 of DOMA defined marriage as a “legal union between one man and one woman,” and spouse as “a person of the opposite sex who is a husband or a wife.” However, with the repeal of DOMA, same-sex married couples may finally be treated with equality and invoke this tax benefit as well as many others.

Another estate tax benefit that is now available to same-sex married couples is that of portability which was part of the 2010 tax law changes. This concept allows the surviving spouse to use the unused estate tax exclusion, which is currently $5.25 million, upon the passing of the spouse as their own. To utilize this benefit, the executor handling the estate of the deceased spouse need to elect on the estate tax return to “port” the unused exclusion to the surviving spouse, who may then use the remaining credits.

Another important estate planning benefit now available to same-sex couples is gift-splitting. Currently, individuals are allowed to give away $14,000 a year to as many people as they want without reporting the gift or paying a gift tax. There are three ways married couples can “gift split”: (1) each spouse may give $14,000; (2) the spouses may collectively give $28,000 from a joint account; or (3) a single spouse may combine the gift exemption and give $28,000 from his or her own account.

This new ruling also impacts company retirement plans, rollover rights for retirement accounts and other IRA accounts.  Same-sex married couples have access to the Employee Retirement Income Security Act of 1974, which gives your spouse the right to be the sole primary beneficiary to qualified retirement plans. Also, special rights are created for all retirement plans including IRAs that allow the spouse to rollover the account and defer taking withdrawals until the surviving spouse reaches the age of 70½, rather than immediately taking withdrawals by December 31^st of the same year.

Whenever a new law is enacted, it’s important to seek advice from an experienced estate planning attorney who stays on top of these changes to update your estate plan is up to date and correctly reflects both your intent as well as the changes in the law.

The post DOMA is Unconstitutional, Now What? appeared first on Desert Law Group | Kimberly T. Lee.