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Do I still need an estate plan with the new exemptions?

The federal estate tax exemptions have doubled in 2018 up to $11.2 million for every person. This means that -- unless you're very wealthy -- you probably won't have to worry about federal estate taxes applying to your estate and all of your wealth will passed to your heirs without any hangups. However, this does not mean that you don't need to have an estate plan or an estate plan review.

There are a lot of old wills and trusts out there that were made under the previous estate planning rules and regulations. These older wills and trusts may require an update. Failure to update them could lead to unintended consequences. For example, some estate plans are set up to pass all exempt assets to one person, and leave the nonexempt assets to another person. However, exempt assets in 2001 were $675,000, and they've steadily increased until the $11.2 million they are today. This means that under the above example, the kids would receive everything. The plan clearly would need to be adjusted.

Trusts may also need to be revised or completely done away with. Individuals who have trusts may want to check on whether the trusts are necessary under the current rules. An obsolete and unnecessary trust could end up costing your estate and your family financially under the new system. For example, inheriting assets directly from the estate -- as opposed to from a trust -- may represent a tax break to the heir. Money inherited through a trust is generally hit with heavy tax costs.

If you hope to get your estate plan in order with a good estate tax reduction plan, make sure you understand the new estate rules to determine if your trust plan is necessary.

Source: Chicago Tribune, "New tax law doesn't change need for estate review," June 05, 2018

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