Is Estate Planning Tax Deductible?

Tax season is coming up and if you’ve recently set up an estate plan or edited yours, you may be wondering whether the fees you had to pay are tax deductible. We’re here to answer that question!

What is Estate Planning?

Estate planning comprises a wide variety of things, but basically an estate plan is a plan you put in place to determine how your assets will be divided upon your death. It can also involve requirements for how your wealth and property should be handled should you become incapacitated. Estate plans can even include provisions for whether you’d like to remain on life support or issue a Do Not Resuscitate order if you’re unable to decide for yourself.

People begin making estate plans for many reasons. If you have children, you’ll want to be sure you leave them with something when you die and you’ll want to make arrangements for their guardianship. If you purchase a house or make another large investment, you’ll want to determine what happens to that property when you pass on. If you’ve recently become divorced, you’ll want to update your will to change what your ex is entitled to (and the control they have over you in medical emergencies and your children’s funds).

Can I Deduct Estate Planning Fees From My Taxes?

If you’ve begun creating or updating your estate plan, you will have hired a lawyer to complete the process. The fees for this service used to be tax deductible, but essentially they no longer are. After President Trump enacted the Tax Cuts and Jobs Act in December of 2017, estate planning fees could no longer be included as itemized miscellaneous deductions on your tax returns.

In fact, now all miscellaneous deductions subject to 2% of your adjusted gross income (AGI) have been eliminated. These rules are set to expire in 2025 but different administrations could make changes before that. In the meantime, according to IRS Publication 529, there are a few other estate planning expenses that you can still deduct from your taxes:

1. Gifts made to charitable organizations while you’re still living. This would be an itemized deduction, but it’s not a miscellaneous itemized deduction and therefore still permitted.
2. Income in respect of a descendent. This is income that a deceased person should have paid taxes on, but it wasn’t included in their last tax return. The beneficiary must include it in their income, but they can claim a deduction.
3. Excess deductions on the termination of an estate. These refer to deductions that could have been claimed in the final year of a trust’s operation but weren’t due to the fact that the deductions exceeded the gross income. Some of these can be deducted by the estate beneficiary.

To uncover all of the possible deductions you can claim — whether related to estate planning or anything else — contact our expert Certified Public Accountant, Paul Anderson. He’ll walk you through the options that apply to your situation and help you get the most from your upcoming tax return.