Your Estate Plan Just Got An Upgrade – What To Do Now

Estate planning just changed; your plan may need to as well. The OBBBA may ease federal estate tax pressure, but older wills, trusts, beneficiary forms, and healthcare directives can still create problems if they are outdated.

Hear about what to consider on our latest podcast with Jonathan Mathews, CFP®.

Read the companion blog post >

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Transcript

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Welcome to You and Your Money. Today's episode features Jonathan Matthews, Associate Vice President Wealth Advisor at WHZ Strategic Wealth Advisors. Now let's get into the changes to estate planning rules and what should families be paying attention to? Let's start there. Yeah, well, let's start with one that touches almost everybody, the standard deduction. That's what you subtract when you're doing your income taxes. And for most households, the OBBA was— it made it a little bit more generous from 2025 on. It increased again this year. 2026, it was $32,200 for married couples and filing jointly and$16,100 for single filers. You could also do head of household, which was $24,150. And what this means is that a little more than 10% increase over the previous standard deduction. And it gives you a little bit room to save, give more, pass along wealth, et cetera. You also mentioned retirement. Is there anything specifically for older listeners? There is, and that's a nice one. If you're 65 or older, there is new additional deduction up to $6,000 available through 2025 through 2028. It does phase out at higher incomes. Not everyone will get the full amount, but for a lot of retirees on fixed income, that's real money back in your pocket. You might have felt that in the last returns if you're over 65. Where the planning comes in, it's a change that can affect decisions about where you take account withdrawals from in retirement. So if you're looking at Social Security, surviving spouses, things like that, Take a pause and look at how that fits into the pieces of the puzzle. So what about younger families, people with kids or even grandkids? There are a couple things worth knowing about there. First, there's a new type of account that you have, maybe it's a 538, commonly known as a Trump account. Eligible children, that just actually opened up for people. Eligible children can receive a one-time $1,000 federal contribution. And family members and even employers can contribute. There are annual limits to that. One important detail to remember there is that these accounts couldn't actually be funded until July 4th of this year. So now it's more of a get familiar with it item rather than rush out and get it done immediately. But it is something to look at. They won't replace 529 educational savings plans or other strategies, but they are a tool to help a younger person get a financial head start earlier. And secondly, for families that are going through adoption, the adoption credit was also enhanced as part of a now, it's now refundable, which is a big difference. What about, there was a big estate tax change too, wasn't there? Yeah, that was the one that affected the, that probably made some of the headlines 'cause it was a big splash. It affects high net worth, very high net worth families. The federal estate exclusion rose from $15 million up to $30 million for, per person or $30 million for a married couple. And for a small number of families that, will mean a lot. If they're near that level, that's meaningful and they should absolutely review plans. For everyone else, the key takeaway is the fact that you're probably not going to owe federal estate tax does not mean you should not have an estate plan. Those are two very different things. So drill down on that. Why, why you still need a plan even though you don't necessarily owe estate tax? Because proper estate planning is about a lot more than just taxes. It's about control. Most families still need a plan for who can act if someone becomes incapacitated, who inherits what, who makes the healthcare decisions, how your loved ones actually receive what you leave to them. That means things like durable power of attorney, healthcare proxies, living wills, guardianships for minor children, the beneficiary designations are up to date on retirement plans, life insurance. All that stuff matters. And the stat that really gets parents' attention, I think, is that The same study found only about a third of parents with minor children have the will that I mentioned earlier. So for most families who raise kids, you don't want the court to end up making those decisions rather than you. So no one has any more motivation, I think, to do that than the parents. And I imagine those everyday documents are what— are where things kind of go wrong, right? That is where the real stories are, and we see that unfortunately. A retirement account that still names an ex-spouse, a life insurance policy that lists a parent that maybe had already passed away, names of guardians that have moved across the country, moved to the other side of the country years ago. These create real stress for families in the time that they happen, and it's at the worst possible moment. So it's nothing to do with the size of the estate. A will doesn't control the account that passes by beneficiary designation. It's making sure everything lines up. The word that comes up frequently in our world is coordination. How so? Tell me more. Well, because strong estate planning isn't just the legal document, it's a coordinated strategy. So you're working with an attorney that drafts the documents. You're working with a CPA that looks at the tax implications. Your financial advisor connects all of this stuff together. We're quarterbacking that. So make sure that the account titling, beneficiary designations, investments, insurance, income, all, you know, that all lines up. The coordination is where that comes together and it can oftentimes fall short if you don't have someone looking at the whole picture. A trust never gets funded doesn't accomplish anything. It's a good investment strategy, can unravel if the assets aren't titled the right way. At WHZ, our role is to help clients see how all of those pieces fit together, and we're a neutral third party who helps the family have that conversation as well, which can help things feel a lot less awkward. The family conversation piece, that's always a big part of what you do, isn't it? It is. We're in the middle of all of it. We've talked about the generational wealth transfer that's happening, trillions of dollars over the next couple decades, and it's moving from one generation to the next. And money's funny. You know, people get— it can make things weird. Inheritance is an emotional event too. It's not just a financial one. So we always encourage families to bring everyone into the conversation. Not just who maybe they thought should be included, but who all should be included across generations. And if everyone's at the table, then they can share their wishes and it can be a lot more productive. We help with that all the time. Folks want to start, we have actually a piece online, Smart Strategies to Help Maximize Generational Wealth. That's at whzwealth.com/wealthtransfer. For more information regarding wealth management and customized financial planning with WHZ Strategic Wealth Advisors, please visit whz wealth.com whz strategic wealth Advisors offer securities and advisory services through Commonwealth Financial Network Member FINRA sipc, a registered investment advisor Fixed insurance products and services offered through CES Insurance Agency. They practice at 697 Pomfret Street Pomfret Center Center, CT 06259 and 392AMerrow Road, Toland, CT 06084. They can be reached at 860-928-2341. WHZ Strategic Wealth Advisors do not provide legal or tax advice. The tenured financial services team strives to support clients in achieving their financial life goals while providing absolute confidence and unwavering partnership for life.