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Is Estate Planning Tax Deductible?

Estate planning often gets brushed off as something only the wealthy need to worry about, but that’s not the case. It’s more than just deciding who gets your collection of vintage stamps or the family home. It’s about protecting those you care for, and securing their financial future. And with the word “tax” floating around in almost every conversation about wills and estates, it’s natural to ask yourself: Is estate planning tax deductible?

We answer that question here, as well as provide you with a clear understanding of what estate planning is and how an estate tax planning professional can help you make informed decisions. 

Demystifying Estate Planning

Estate planning is the process of arranging the management and distribution of your assets after your passing. It includes many different components including wills, trusts, powers of attorney, healthcare directives and more. Fundamentally, estate planning safeguards your financial legacy, provides for your loved ones, and minimizes potential estate taxes and legal complications.

By clearly outlining what should be done with your assets, you prevent disputes among your heirs and ensure that your estate is handled according to your values and goals. It gives you the peace of mind in knowing that your financial affairs are in order and that your loved ones are taken care of in your absence. 

What is Tax Deduction?

Tax deduction is a way to reduce your taxable income by deducting allowed expenses, thereby decreasing the amount of tax you need to pay. The less tax you have to pay, the more money in your pocket.

Your deductible expenses could be anything from business expenditures, educational costs, and healthcare expenses to charitable donations and specific investment losses. The nature and extent of what can be deducted is defined by the Internal Revenue Service (IRS) and can vary based on your filing status, income level, and specific tax regulations. 

The Tax Deductibility of Estate Planning

Because of changes to the Tax Cuts and Jobs Act (TCJA) implemented in 2017, deducting estate planning fees is no longer allowed. The TCJA suspended many miscellaneous itemized deductions that taxpayers could claim on Schedule A of their tax returns through 2025. Before the TCJA, you could deduct certain estate planning expenses, such as estate planning legal fees for tax advice or for the production or collection of income, if they exceeded 2% of your adjusted gross income (AGI).

However, it’s important to note that while the direct costs of drafting wills and setting up trusts are not deductible, fees related to estate planning that involve income-generating assets or investment advice may still be deductible in certain cases.

Seeing as tax laws and interpretations change, and individual situations vary, consulting an experienced estate planning attorney for personalized advice is recommended to get a better sense of your options.

The Value of Estate Tax Planning Services

Although estate planning itself may not be tax deductible in the way it used to be, estate planning itself is still extremely valuable.

As your net worth grows, strategic estate planning is the key to protecting your assets and making sure your family is taken care of. Federal estate tax rates can be as high as 40%, meaning your family could miss out on almost half of what you leave them if you don’t to get your affairs before you pass

Estate tax professionals will support you as you organize your taxable estate, which may include IRAs, retirement plans, life insurance, real estate, and more. They’ll help you understand and apply all the strategies available to you, whether it’s credit shelter trusts, lifetime gifts, family limited partnerships, or others, so that your family can benefit from the work you’ve done throughout your life.

TPI Group – Help You Make the Most of Your Money

One thing is for sure about estate planning and tax deductions: it’s complicated. But that doesn’t mean you should shy away from it. With the right guidance, you can navigate these waters and preserve what you have built.

Don’t let the complexities of tax laws stop you from making informed decisions. Whether you’re in need of estate planning services, tax planning services, or tax preparation services, TPI Group can help. Reach out to us today to protect the money you’ve made and secure your family’s future.