Do wealthy people end up paying a lot less in taxes under the new tax law? Not necessarily.
People who had already made estate plans before the federal estate tax exemption was doubled, could end up paying more in taxes than necessary because of a popular way of working around the estate tax, according to the Wills, Trusts & Estates Prof Blog in "Don’t Let New Estate Tax Law Cause Your Family to Pay Unnecessary Capital Gains Taxes."
Many people held assets valued up to the estate tax limit personally. Anything they owned over that amount was put in a trust. However, trusts are often subject to capital gains taxes. Those taxes still need to be paid. However, they are lower than the estate tax rate.
The problem now is that the higher estate tax exemption means people can hold more assets personally. If people do not make changes to their plans, they may pay more in capital gains tax than necessary.
Talk to one of our attorneys about creating an estate plan that takes the new tax law into consideration.