Congratulations! You have made an excellent choice by deciding that this year you were going to create an estate plan. You made an even better choice to use a real lawyer to help you through this difficult process. Now that the end of the year tax questions are coming in from your accountant, you may be asking yourself if your estate planning legal fees may be tax deductible, and that’s a good question. You should always consult a tax professional when creating an estate plan should you have any tax related issues. Although this author is a lawyer and not an accountant, we did find some resources that may be helpful to you below.
The Secures Tax Act of 2018 Effect on Estate Planning Deductions
Prior to 2018, you may have been able to deduct legal fees associated with estate planning. However, that all changed with the Tax Cuts and Jobs Act passed that year by Congress. The Internal Revenue Service (IRS) had an exception allowing legal fees associated with estate planning to be deducted, however, those exceptions are no longer available. You can read an overview from the IRS of the Tax Cuts and Jobs Act here.
The IRS Tax Code on Estate Planning Deductions
Although you should really speak with a tax professional regarding taxes for your particular situation, the IRS has provided some additional guidance on the subject. IRS Publication 529 states “personal legal expenses are not deductible”. This includes “preparation of a will”.
Other Estate Planning Preparations That Are No Longer Deductible
Professional legal expenses are not the only thing to take a hit with the changes of the laws in 2018. Other estate planning preparations have also been included in the “do not deduct” list from IRS Publication 529. Here are a few listed below:
- Burial or Funeral Expenses
- Cemetery Lot Costs
- Life Insurance Premiums Paid by the Insured
- Personal Disability Insurance Premiums
- Preparation of a Title (or Defense or Perfection of a Title)
Will Estate Planning Deductions Ever Be Deductible Again?
We do not have a crystal ball, but many experts agree that bringing back the personal estate planning tax deduction will be in the best interest of most Americans. With the onset of COVID-19 across the country, more people than ever have decided to create an estate plan with a professional lawyer. When the Tax Cuts and Jobs Act was passed, a worldwide pandemic was not even considered as an idea, let alone a threat.
The experts at Investopedia predict that a political change may help bring back the deductions lost with the passing of the Tax Cuts and Jobs Act in 2018. This change should occur in 2025 but can happen earlier due to the COVID-19 pandemic and its lasting implications. Either way, many provisions of the Tax Cuts and Jobs Act will no longer be in force without Congress acting to renew them and that may be an opportunity to bring back much needed estate planning deductions.
Should I Avoid Estate Planning Until the Tax Deductions Come Back?
In short, no. If the past year has taught us anything it should be that we should never put off estate planning for a possible short-term gain. It would be best for you to talk directly with your lawyer if you have any concerns regarding your estate plan. Coordinating a time when you, your attorney, and your tax professional can talk is the best way to handle estate planning tax questions. This way all parties concerned will work together to create the best results for you.
What should I do Next?
The best thing for you to do if you are considering drafting an estate plan is to contact an attorney. Estate plans are unique to each individual and a document off the internet could cause more harm than good. You can read more about this in my blog “Do I Really Need Estate Planning?”. Please contact our office if you are in need of an estate plan and put your mind at ease. Call 888-778-0063 today.
Photo by Tyler Franta, https://unsplash.com/@tfrants
Lori Vella is an Estate Planning and Business Attorney. She works virtually throughout Florida and New York, but has her home office in Tampa, Florida. She is mom to a little boy which ignited the passion for helping other families. She and her son enjoy car rides, playgrounds and taking mini-adventures. They also have an organic garden that surprisingly yields vegetables. Lori considers herself well-versed in Seinfeld and welcomes any trivia!
Disclaimer: The Law Office of Lori Vella’s website contains general information directed to Florida residents. This firm does not intend to give legal advice through its pages and/or blog. If you need legal advice, we encourage you to find an attorney licensed in your state. This language on this website does not create an attorney-client relationship between you and this firm.