The larger picture needs to be considered rather than the short term.

The federal estate planning exemptions have been increased. However, that doesn't mean an estate plan is not needed, because it is still a good tool when it comes to protecting your heirs, according to ThinkAdvisor in “Estate Planning Is Still Important.”

The new exemptions and the fact they run out in 2026 means that careful thought still has to be made when it comes to estate planning. Let's start with why many people buy life insurance policies. As young parents, they buy life insurance so a surviving spouse and family will be able to continue to live in their home, pay the mortgage and send children to college. Another reason for life insurance is to cover the cost of estate taxes.

Remember the new higher estate tax exemption is federal. Your heirs may still have state estate taxes and inheritance taxes, depending upon where you live. Having an insurance policy will still help with the costs of settling an estate and paying any taxes that are due.

The new tax exemption also has a sunset date. The year 2026 may seem far away. However, it will arrive while we are busy with our lives. It may be much harder and more expensive for an individual to purchase a life insurance policy in 2026 than it is right now.

If someone is very old or in ill health, they have a different window of time for planning. However, if you are in your middle years or relatively healthy, now is not the time to put off purchasing life insurance or to let an existing policy lapse.

We know that political landscapes change. If they do, and you want to buy a policy, there may be additional obstacles in the future.

Life insurance also serves as a tool for your estate. If your estate plan seeks to distribute an inheritance equally from assets in a traditional IRA, life insurance can become an equalizer. Let's say one child is in a much higher tax bracket than the others. Upon receiving the IRA, he or she will have to pay more in taxes than the others. The child in the lower bracket will end up with a larger sum of money, having lower taxes on their inheritance. This could lead to sibling arguments, which are not uncommon when brothers and sisters become heirs. The insurance policy proceeds can be used to make up the difference.

Another point to consider is who owns the insurance policy? If it is owned by a trust, you may not have the legal right to make a change. If the trustee does not agree that the policy should be liquidated or canceled, they may not allow the change to go forward.

We can advise you in creating an estate plan that fits your unique circumstances.

Reference: ThinkAdvisor (Jan. 11, 2019) “Estate Planning Is Still Important”