Have you heard we have a new estate tax bill?
Well, not exactly.
But estate taxes were one of the myriad items covered by the Reconciliation Act signed into law on July 4, 2025, and unofficially referred to as One Big Beautiful Bill.
The estate tax exemption, already at $13.9 million per person in 2025, will increase to $15 million in 2026, and continue to increase with cost-of-living adjustments in years to come.
What does the new law mean for your estate planning?
For most of us regular folk (the non-multimillionaires), the new estate tax laws won’t change a thing, since estate taxes were never a concern in the first place.
According to the Tax Policy Center, only 4,000 estate tax returns were filed in 2023 showing an estate tax due.
When you consider that the Census Bureau estimates that about 2.8 million people died in 2022 (with estate tax returns due nine months later), you can see the estates of the vast majority of decedents are not taxable. The Tax Policy Center estimates that only 0.14% of estates have an estate tax owing.
Does that mean you don’t need to do any estate planning?
Every time a new tax bill passes increasing the estate tax exemption, I’m met with comments like, “Will you be out of a job since no one has to worry about estate taxes anymore?” And yet, here I am, 35-plus years later, still doing estate planning for clients.
The simple truth is that taxes are not what drives estate planning.
Why should I have an estate plan if I’m not rich?
What drives estate planning, and what should be driving you to get your estate plan together or updated, is the need for a carefully thought-out plan for your assets at death, and your legacy, but just as importantly, your care, should you become incapacitated.
It isn’t the size of an estate that raises issues or can cause complications.
If you have minor children, a blended family, real property, property in another state, irresponsible heirs, a family business, special needs beneficiaries, persons you want to disinherit, or you may one day grow old or lose capacity, you need an estate plan.
What’s in an estate plan?
A typical estate plan would include the following documents:
—A general durable power of attorney. This is a document which authorizes another party, named by you, to act on your behalf in the event of your incapacity. This can be crucial if you were to become incapacitated and another party needed to, for example, access your bank account to pay your bills, arrange for your assisted living, make personal decisions for you, or handle other personal matters.
—Advance healthcare directive. An AHCD allows you to appoint another person, and preferably a backup, to make health care decisions in accordance with your stated wishes. In the AHCD you will choose the extent of life sustaining treatment you would like, your preferences for things like pain relief, whether you’d like to stay in your residence as long as reasonable, and your after-death choices (cremation, burial, etc…).
—A will. A will sets forth your plan for your assets at your death and allows you to appoint the person you’d like to carry out your plan, known as an executor, administrator or personal representative. While a will can establish a trust, for example, to control assets for your minor children until they are adults, a will must go through a probate court proceeding to be effective.
—A living trust. If you own real estate, have minor children, wish to make provisions to have your assets distributed over time instead of in one lump-sum, or if you simply wish to avoid a public probate hearing, a living trust should be part of your estate plan. A trust is a document you, with the help of an estate planning attorney, create during your lifetime to provide directions to a trustee (also named by you) regarding your assets for the benefit of the parties you name. A living trust can and should also set forth terms for your care in the event you became incapacitated.
Note: if you have a living trust, you should also have a “pour over” will—that is, a will that “pours over” any assets subject to probate into your trust. It’s a back-up in case you don’t get all assets into your trust before your death.
What else should I know about estate planning?
If you have a trust, it’s important to make sure your assets are titled in the name of your trust. Your house, bank accounts, and other assets (besides retirement plans) should be titled as “Joan Smith, Trustee of the Joan Smith Trust dated January 2, 2002,” for example. It’s not enough that they are listed on a schedule attached to your trust. The actual title needs to be changed.
Also, it’s a good idea to review your estate plan every few years and make changes as needed. Life changes faster than estate tax laws change.
Estate Taxes don’t affect most people. But death and incapacity are still concerns for everyone. Get your plan in place, and maybe you can casually drop into conversations that you’ve had your estate plan created. People might think you’re a multi-millionaire.
Teresa J. Rhyne is an attorney practicing estate planning and trust administration in Riverside and Paso Robles, CA. She is also the #1 New York Times bestselling author of “The Dog Lived (and So Will I).” You can reach her at Teresa@trlawgroup.net
