Are estate planning expenses tax deductible?

Estate planning fees were tax-deductible, but are no longer tax-deductible. The simple answer is no, most estate planning services are not tax-deductible. However, there is more to it than that. Legal fees for estate planning can only be deducted if they relate to income-generating assets.

Trust or estate beneficiaries have limitations on the tax deductions they can claim on their tax returns. For example, if you seek legal advice related to transferring your residential home to a newly created trust as a way to avoid legalizing probate, this would qualify as a personal expense. Under these rules, the administrative expenses of an estate or trust that would normally be subject to this 2% limitation were fully deductible provided that they were paid or had been incurred in connection with the administration of the estate or trust, and would not have been incurred if the property were not in the trust or heritage. The right lawyer can also provide you with advantageous estate planning techniques, such as charitable giving.

If your estate plan involves some complexity or is large enough to put you at risk of paying estate taxes, then you'll want to work with an attorney who specializes in estate planning. For example, your lawyer could state that 25% of your fees were for your will (not deductible) and the remaining 75% for income and estate tax planning. Depending on your situation, your lawyer may recommend that you establish a trust as part of your estate plan. Contact a qualified estate planning lawyer to help ensure that your loved ones are cared for and that your wishes are met.

These changes will be renewed again in 2025, so estate planning charges may again be eligible for tax deductions in the future. Contact your HBK advisor to discuss the effect that these proposed regulations may have on your tax situation. On the other hand, property income tax applies to interest, dividends, or other types of income earned by inheritance after the death of the deceased. Many estate planning attorneys already bill separately for tax-deductible services, but it's still a good idea to address the issue with your lawyer early in the process.

He focuses on tax compliance and consulting, as well as the collection and review of financial statements, and is a member of the firm's Tax Advisory Group. For example, if you have a living trust that generates income, any legal costs associated with maintaining and preserving your trust are tax-deductible. The conditions for canceling an estate or trust, for tax deduction purposes, are still being reviewed by the IRS.

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