As a new tax year arrives, it’s a good time to look at refining your estate plan. Policy changes often start at the beginning of a new year, and you may have changes in your life that could influence if your estate is or is not taxed. On top of that, you may want to start putting money into a trust for a charity or begin giving away gifts.
All of these things are possible, but you do need to focus on your estate plan and updating it appropriately. Here are three tips to help you optimize your plan.
- If you received a large sum of money, it’s time to update your estate plan
Whether you received a large sum of money from winning the lottery or from an inheritance of your own, you do need to consider how that could impact your estate plan. In 2022, the estate tax exemption applies to any estate under $12.6 million. For those who pass away in 2021, the exemption is $11.7 million.
If your estate is now over that value, you need to consider ways to reduce it to avoid estate taxes, such as giving away gifts or putting money into specific trusts.
- When federal or state tax laws change, you need to update your estate plan
If you have moved to a new state or know that a federal law has changed that influences estate plans, then you should update your estate plan as soon as possible. It’s worth asking your attorney to contact you when major changes occur, so you can update your estate plan when necessary.
- If you want to give, start planning to reduce taxes now
If you want to give away gifts to your loved ones or charities, now is the time to think about how to reduce your taxes. You can give up to $16,000 as a gift (as an individual) to anyone you’d like without having to file a federal gift tax return in 2022. You can reduce your estate’s value by doing this.
These are a few things to keep in mind in a new year. These changes could make a big difference in your estate plan.