The fiscal cliff deal is a set of rule changes that affects everyone differently, including those with estate plans. Bob Ross of Ross Estate Planning in Sturgeon Bay says now is a good time for people to review their estate plans.
Ross says his biggest concern after the deal is for people with retirement plans. In theory, retirement plans are designed to have people put money away while they are in a higher tax bracket, then take it out after retirement when they are in a lower tax bracket. Now it looks like income rates are going to continue rising, but there is a way to avoid paying higher taxes later.
Two other major changes the deal made in the estate planning sphere include a raised tax rate for estates and a break for charitable IRA rollovers. The estate tax rate increased from 35% to 40%, but only on estates valued at more than $5 million. The charitable IRA rollover expired two years ago, but Ross says Congress is re-implementing it, allowing those age 70½ or older with retirement plans to donate without being taxed.
Regardless of these legislative changes, Ross says estate plans should be reviewed every year or two because family situations change and estate plans need to reflect those changes.