Estate Planning Has Changed Drastically over the Years

The estate planning process has evolved over the course of the past two decades. There is no longer uncertainty regarding federal estate taxes, including the need for a married couple to utilize a complex trust to minimize such taxes, according to Linda O. Foster and James A Foster of Foster Financial Services Inc. in Washington. However, creating an estate plan for the “traditional” family unit is no longer a viable option for many Americans, either. Financial services experts today can help people to develop flexible estate plans that can easily be tweaked to align with both current and future changes.

Back in 1995, 55 percent was the federal estate tax rate, and the estate tax exemption was just $600,000. A person could easily accumulate an estate that was taxable by owning a house and some investments as well as life insurance, according to Linda O. Foster. In addition to minimizing estate taxes, avoiding probate, which is a time-consuming and costly process, was a major concern a couple of decades ago. This is why the revocable living trust soared in popularity above the last will and testament.

Twenty years later, the estate tax exemption is far higher–more than $5 million–and will keep increasing annually according to inflation. In addition, the estate tax rate dropped to 40 percent from 2002 to 2013. Furthermore, people no longer need trusts to avoid probate; a person can simply establish a transfer-on-death investment account and payable-on-death bank account. Transfer-on-death real estate deeds and vehicle titles can also be established in some states, said Linda Foster.

As a result, the focus of estate planning has now largely shifted for the average person, who falls under the high $5 million-plus tax exemption. Rather than concentrating on estate tax planning, people are currently focusing on how to address the needs of their blended or dysfunctional families, with the divorce rate today being much higher than it was 20 years ago. A financial services company can help American families in a variety of situations to effectively engage in comprehensive estate planning that meets them exactly where they are in today’s society.