Obamacare and Estate Planning in Illinois

The Affordable Care Act has recently dominated news across the country.  Regardless of what you think of the law, it is going to have an impact on your estate planning in the very near future.  Two authors recently wrote a helpful piece in the latest Illinois State Bar Association Trusts and Estates newsletter giving an overview of what to expect.

It is important to understand if and how the Affordable Care Act may affect your estate planning.  Some of the provisions may have a relatively uncomplicated impact on your future.  For example, non-medical withdrawals from health savings accounts will be taxed at 20%.  Additionally, using pre-tax flexible spending accounts on nonprescription medications will be prohibited.  Other parts of the ACA’s provisions, though, are exceedingly complex. Careful planning and advice will be necessary to ensure that you can reduce your overall tax liability.  One of the largest effects to your estate comes from the investment income surtax of 3.8%, which applies to the lesser of the investment income or the amount that income exceeds over the threshold.

Put more simply, there are some tax increases and tax reductions, and all of that means it is time to look at Obamacare-driven estate planning opportunities if you haven’t already done so.

Other taxes that may have an effect on you include:

  • A 10% excise tax on tanning salons

  • Beginning in 2013, the maximum contribution to a pre-tax healthcare flexible spending account set at $2,500

  • Beginning in 2013, medical expenses are taxed only to the extent they exceed 10% of adjusted gross income (the 7.5% limit still applies to people over 65 until 2016)

  • Taxes on individuals not complying with the mandate, which may range from $0 to $4,500, and

  • Beginning in 2018, a 40% tax on “Cadillac” health plans.

We view clients as part of our family, so we view it as our duty to ensure that you are as fully prepared and informed as possible throughout the estate planning process.  Part of this duty entails keeping up to date with new laws, regulations, and taxes that can have an effect on your estate.  The Affordable Care Act is major change that will cause reverberations throughout many aspects of our society – from elderly care, to small businesses, to those without health insurance.  As the Affordable Care Act continues its roll-out, our attorneys will provide you with holistic and cost effective strategies to respond to these changes.  Please feel free to contact us if you have any questions.