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A look at the elder law issues at stake in the new tax law

This article looks at some of the elder law and estate planning issues at stake under the new tax law.

Recently, President Trump signed into law a sweeping tax reform package called the Tax Cuts and Jobs Act (TCJA). While the final piece of legislation is complex, there are a few provisions that will have a big impact on elder law and estate planning issues. Specifically, the deduction for the estate tax has been increased by a massive amount, while the individual health insurance mandate has been repealed. These two changes will likely have a significant impact on the pocketbooks and elder care planning of millions of Americans.

Estate tax deduction doubles

For high net-worth individuals, one of the biggest changes in the new tax law is the increase in the estate tax deduction. As Forbes points out, the lifetime exemption for estate taxes doubles under the TCJA, to $11.2 million for individuals and $22.4 million for married couples. It is important to note that the increase is only in effect until 2026, at which point the 2017 deduction rates (including adjustments for inflation) will be reinstated unless Congress decides to extend or make permanent the bigger deductions. By way of comparison, the Bush-era tax cuts included a similar sunset provision that was designed to make them temporary, but Congress eventually decided to make those cuts permanent.

Furthermore, the gift tax lifetime exemption and the generation-skipping exemption are also going up to $11.2 million per individual. Wealthy families could take advantage of these gift tax exemptions and the increase in the estate tax deduction to gift larger amounts to children, either directly or through a trust, which in turn could help them save potentially millions of dollars on their tax bill.

Health insurance mandate repealed

However, the TCJA is not a financial windfall for everybody. As MySA reports, the legislation also repeals the individual health insurance mandate of the Affordable Care Act (ACA) beginning in 2019. That mandate required everyone to pay into the health insurance system so as to keep costs affordable for everybody. With that mandate being repealed, many younger people who are in good health will likely drop their insurance, which in turn will likely drive up health insurance costs for older individuals.

The Congressional Budget Office, which is a non-partisan federal body, has estimated that insurance premiums will increase by 10 percent for those who choose to keep their insurance and that 13 million people will lose their health insurance coverage entirely. These increased costs are important to keep in mind when making retirement and elder care decisions.

Elder law and estate planning

The TCJA brings about important changes for those who have elder law and estate planning concerns. These changes present a perfect opportunity for people to reassess their estate plans and se e what may need to be adjusted. An elder law and estate planning attorney can help clients with their various legal issues so as to assist them with protecting both their assets and their best interests.