If your client's projected estate tax exemption appears higher than expected in future years, this is usually because Voyant assumes the exemption will continue to increase over time.
Why does the exemption increase?
Current US legislation provides for the federal estate tax exemption to be indexed annually for inflation.
To reflect this, Voyant projects the exemption forward using the Inflation Rate set under Plan Settings > Inflation/Growth.
As a result, the exemption is increased each year using the plan's inflation assumption. Because those annual increases compound over time, the projected exemption shown later in the plan may be significantly higher than today's published exemption.
Why does Voyant use the plan's inflation rate?
Using the plan's inflation assumption provides a consistent and transparent method of projecting future exemption amounts without attempting to predict future legislative changes.
Historically, the federal estate tax exemption has increased significantly over time through a combination of inflation indexing and legislative changes. While past performance does not guarantee future results, applying the plan's inflation assumption has generally been a conservative approach when compared with historical exemption growth.
Can I change this assumption?
Yes.
If you believe a different assumption is more appropriate for your planning scenario, you can adjust the plan's inflation assumption.
To do so:
- Open Plan Settings.
- Select Inflation/Growth.
- Adjust the Inflation Rate.
Note: Changing the inflation rate will affect the projected estate tax exemption, along with other values in the plan that are linked to inflation.
Things to consider
The estate tax exemption is determined by legislation and may change in the future.
Voyant cannot predict future tax law changes, so it applies the plan's inflation assumption as a reasonable projection. As legislation is updated we will update accordingly.