The Tax Cuts and Jobs Act of 2018 (TCJA) put in place a variety of changes to both individual and business tax structures.
One such change, which increases the estate tax exemption, affects the way clients may think about life insurance planning.
As we know, life insurance is a common element of several estate tax planning strategies. Many individuals use life insurance to ensure that estate taxes are covered, preventing heirs from having to sell off other assets.
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With the estate tax bar heightened, some clients may believe they will no longer be affected by estate taxes and thus think they won’t need life insurance to cover the balance. However, there are several reasons this view may be too narrow for many individuals.
The first argument against eliminating life insurance from clients’ estate planning strategies is that the new exemption is temporary and is slated to sunset in 2026. Therefore, unless the client is in ill health or very old age, they may want to rethink the way they view the exclusions.