Oftentimes, people use the term “estate planning” and “elder law” interchangeably. In fact, you’d be surprised how many Floridians confuse elder law with estate planning. Although both have a wide range of related factors, they are fundamentally and legally different. Today, the increase in average lifespan means people need to think about their standards of quality of life and how to get there. As a Floridian, you have to seriously consider what would happen to your estate after you pass away. In 2022, it is normal to feel endless uncertainty about estate planning. As of now, the spotlight is on the slated elder law that requires more awareness among Floridians. Nonetheless, there are some certain and some uncertain estate planning changes for Floridians in 2022. At its core, you need to realize and recognize the importance of a thorough estate plan and how it can have a positive impact on your life.
Now, let’s dive into categorical Florida estate planning changes that deserve your attention:
Estate Planning Changes Impacting Low-Income Floridians
An increase in the living cost means Supplemental Security Income (SSI) and Social Security payments will also increase. The fact of the matter is that low inflation hasn’t had an impact on these payments since 2009. And you may not be aware of it but the COLA increase of this year has been the largest of the past four decades.
In retrospect, Supplemental Security Income and Social Security benefits are expected to jump by 5.9%. Floridians will see these changes in their January checks. In total, around 8 million Supplemental Security Income recipients will get to see this increase.
The actual value has now increased from $794 to $841 in 2022. Typically, many people will see the highest increase in their monthly amount. With the exception of Arizona, some states also include an additional amount on top of the increased payment.
On the other hand, changes in SSD or Social Security Disability are not generalized. Instead, SSD payments depend on the work history and family situation of a disabled person. On average, the SSD recipients can expect to see a bump of $76. The Social Security Administration states that the amount would increase from $1,282 to $1,358 per month.
Conversely, the maximum amount of Earned Income Tax Credit will increase by $207. It means the 2021 figure of $6728 will jump to $6,935. Remember that this tax benefit only applies to wage earners that have low-income. Usually, this tax benefit is reserved for parents but now couples without kids can also qualify for the same tax perk.
Estate Planning Changes that Would Impact the Majority of Floridians (and Other Americans)
The income-based tax deductions will see a significant increase in 2022. However, increased numbers won’t be in effect until Americans file their 2022 tax returns. In any case, you can expect to see a tax deduction on your tax return of $25,100.
In the scheme of all things, you can count on this figure to jump to $25,900. But remember that these numbers are applicable to 2021 tax returns that people will file at the start of 2023. And as of now, this figure is slated for married couples.
But if you’re not married, then you can still get a $12,550 tax deduction for individuals in 2022. Just don’t forget that at the time of 2023 filing, you will have to claim a tax deduction of $12,950 deduction. In a different situation, if you’re planning to get married in 2022 then you can get $25,900 as tax deductions from your 2022 tax returns.
When it comes to gift tax on items over $15,000, you will need to file a return in 2022. The good news is that you don’t need to pay this tax until the lifetime value of the gift crosses $11.7 million. The idea of filing a return is to track exactly how much you’ve managed to use out of $11.7 million.
What about Retirees?
Retirees over 65 can expect an increase of $10 in their Part B premium payment. As long as you’re on Medicare and over 65, you will see the jump of $21.60 per month. It means you will get $170.10 rather than $148.50. But if the earned income of retirees is $91,000 or more, then IMRAA or Related Monthly Adjust Amount will increase premiums.
In all fairness, it all boils down to “your” earned income that can hit the amount as high as $578.30 per month. You can also expect to see new co-payment, deductible, and Medicare premium changes in 2022. When it comes to maximizing Social Security, retirees over 70 can enjoy additional perks. In fact, individuals that will hit 70 in 2022 can get Social Security perks on their birthday with a whopping 32% bump in their monthly payments as long as they’re alive.
What about High Net Worth Individuals (HNWI)?
In 2022, the estate-based federal estate tax exemption will increase to $12.06 million. In fact, married couples can leverage this exemption and pass more than $24.12 million without having to cover estate taxes. But changes in this figure entirely depend on the lifespan of a surviving spouse.
For example, if you decide to get married again and accept lifetime gifts, it may change the figure. Surviving spouse may also have to file a separate estate-based tax return. In layman’s terms, you need to be an ultra-wealthy couple or individual to incur estate tax under new changes.
In 2022, the back-door Roth that works as an IRA contribution is no longer part of the 2022 changes. In fact, there is a chance to eliminate IRA conversions singles who earn over $400,000 and married couples who earn $450,000 per year.
Impact on Families Who Live with One or More Disability
New changes will have a positive impact on families living with one or multiple disabilities. On top of an increased SSI of $841, families with a disability will see an increase to their ABLE Act contribution accounts. The truth is that the ABLE Act continues to be useful for families with one or more disabled members. Apart from some exceptions, the annual contribution will see an increase of $15,000 in 2022.
2022 Estate Planning Changes: Perspective
Big changes have small beginnings and estate planning experts believe that many 2022 changes will see an increase in coming years. Of course, if the “Build Back Better” bill were to pass, which doesn’t appear likely now, there would be more significant changes. But until then, 2022 estate planning changes are minimal.
In hindsight, the estate-based tax exemption amount will see no reduction. However, by 2025, the tax exemption would be reduced to $6.5 million. Again, it all depends on whether or not Congress plays an active role and takes action. It is the main reason experts believe there won’t be major changes for some time.
Also, there are no changes in capital gains or trust rules of the past 21 years. In addition, there is no increased amount in the income tax rates and tax calculation for individuals, married couples, wealthy individuals, and retirees.
On the surface, there are basic differences that distinguish estate planning and elder law. Still, it doesn’t change the fact that these two areas tie together seamlessly. The best course of action for Floridians is to opt for a comprehensive and dedicated plan that revolves around their last years and their death.
Details matter and focusing on your estate plan will allow you to live your final years in comfort and peace. When elder law comes into the picture, there’s likely no solid plan for your family and path to move forward after your departure.
In these cases, assets are consumed by taxes, family disputes, and court fees. It’s 2022 and you need to take a moment to think about your life and how you want to leave your legacy after you pass away. The logical approach is to view elder law and estate planning through the same lens to secure your future. Reach out to us so that we can talk about your next steps.
Steve Gibbs, Esq.