Estate Planning Still Matters—Here’s Why

Estate Planning Still Matters—Here’s Why- The need for wills, power of attorney, healthcare proxy, advance directives and other estate planning documents lives on, despite the budget bill’s making high federal estate tax exemption s permanent, says a recent article from The Wealth Advisor, “Even With The Megabill’s Higher $15 Million Estate-Tax Exemption, Estate Planners Won’t Be Out of Jobs.”

The American tax system is built on what some call a “pay now or pay later” premise. Saving for retirement is centered around tax-deferred dollars being stashed in a 401(k) or IRA, and then, when it’s time for distributions, the IRS receives payment when Required Minimum Distributions (RMDs) are taken out and taxed as income. Converting to a Roth helps your heirs by paying taxes up front, but the taxes are still paid eventually. Even when you buy a stock or other securities, and capital gains tax isn’t due until the sale, eventually, Uncle Sam gets his portion.

The core of the federal estate tax philosophy is to tax wealth accumulated during a lifetime, even if taxes were avoided during one's lifetime. Of estates valued at $100 million or more, 55% of assets are unrealized capital gains that haven’t ever been taxed.

In most cases, estates don’t pay taxes on the death of the first spouse. However, the family may pay state estate taxes or inheritance taxes when the second spouse dies.

Why do you still need an estate plan?

Everyone needs a last will and testament to direct how they want their assets to be distributed, whether their net worth is $1 million or $80 million.

Estate planning includes planning for incapacity. This includes a power of attorney, allowing someone else to manage your finances and a healthcare power of attorney, which enables a trusted loved one to be involved in medical decisions. An advance directive expresses your wishes for end-of-life care.

Trusts are used to control how and when assets are distributed. If you wish to leave funds to a sibling who isn’t good with managing money, for example, a trust holds the money, a trustee will decide when and if to release funds, and you set the terms for when the money can be distributed and what it is to be used for.

A final note: Estate planning attorneys commonly encounter instances where estate plans are created but never signed. They make every effort to have their clients finalize their estate plans and fund trusts. One professional shared the experience of a patriarch whose net worth was $80 million. He died before the estate plan documents were signed. He never updated beneficiary designations on his IRAs, so his first wife received all his IRAs. He also never established trusts for the children from his first marriage, so it was up to his second wife to decide whether to give those children their inheritance. They were lucky, as she was generous, which is not always the case.

If your estate plan hasn’t been reviewed in recent years or if you’ve been waiting for life to take a pause before starting on an estate plan, now is the time to consult with an experienced estate planning attorney to make sure that your plans for the future are in place.

Schedule your phone consultation: THE LAW OFFICES OF CLAUDE S. SMITH, III

Estate Planning Still Matters—Here’s Why

Reference: The Wealth Advisor (July 8, 2025) “Even With The Megabill’s Higher $15 Million Estate-Tax Exemption, Estate Planners Won’t Be Out of Jobs.”