Estate Tax Basics

Sierra Sun:  The federal estate tax is levied upon a person's estate at the time of their death. Currently estates under $5 million are not taxed; estates above $5 million are taxed at a rate of 35 percent. Estate planning now is difficult because we are at a time of real uncertainty about what the future holds for estate tax rates, which may make 2012 a good year to do some gifting if you're fortunate enough to have a sizable estate.

For 2012, the lifetime gift and estate tax exemption will rise to $5.12 million for singles and $10.24 million for married couples. The gift tax exclusion had been frozen at $1 million for many years, so this could make 2012 an excellent opportunity to distribute assets from an estate free from tax.

Read more estate tax basics.

2017-10-07T11:14:46-07:00February 23rd, 2012|Estate Tax|

Lull in Estate Tax May Trap Wealthy Americans

Investment News: Tax changes that President Barack Obama and Congress hammered out in the final days of 2010 discouraged clients from seeking estate-planning advice last year, even though estate lawyers argue there are many planning opportunities that shouldn't be missed.

The legislation that set a $5 million estate tax exemption for 2011 and 2012 has all but eliminated “estate tax avoidance” as a motivating factor for clients, according to 32% of estate-planning lawyers and financial advisers surveyed recently by WealthCounsel LLC.

In fact, tax avoidance dropped from being the No. 1 reason in 2010 that clients sought estate planning to fourth last year, according to the survey of 1,085 professionals.

“The Republican-led Congress has done an effective job of vilifying the estate or “death tax' as unfair,” said Matt McClintock, executive director of WealthCounsel. “So with the $5 million exemption, a lot of people breathed a sigh of relief because they said, “I don't have that much,' and it diminished concern for estate planning as motivated by the estate tax.”

Continue reading about the lull in estate tax trapping the wealthy.

 

2016-12-13T20:33:36-08:00January 17th, 2012|Estate Tax|

New Estate and Gift Tax Rules A Game Changer

Yuma Sun:  Many of us spent our childhood years playing sports and games. An important part of our development was learning the rules. Once we understood the rules, we could develop creative strategies for winning.

 When the rules changed, our strategies needed to adapt. Estate planning is no different. Late in 2010, President Obama signed into law changes to estate and gift tax rules.

 If you haven't already, it's important to review the new rules and make adjustments to existing estate planning and gifting strategies. Here are a few of the changes that may affect your plans:

 • Estate taxes reinstated — In 2010, for a single year there was no estate tax. During 2011 and 2012, the top estate tax rate will be 35 percent and the estate tax exemption amount will be $5 million. In 2013, these temporary changes will end and we may see a return to higher estate tax rates and lower exemption amounts.

 • Generation-skipping transfer tax repealed — Generation-skipping transfers allow one person to reassign ownership of assets to another person who is two or more generations younger. For example, a grandparent might transfer ownership of property, by gift or at death, to a grandchild. Historically, GSTs have been taxed at the highest estate tax rate. However, for 2010, the GST tax was temporarily repealed. As a result, gifts made to grandchildren during 2010 were assessed gift tax and not GST tax.

 The GST tax returned in 2011 with the top rate at 35 percent. Executors of estates for those who died during 2010 chose between the estate tax rules for 2010 and those for 2011 by filing an estate tax return […]

2017-10-07T11:14:46-07:00January 9th, 2012|Estate Planning, Estate Tax|

Questions You Should Ask Your Estate Planning Attorney

US News & World Report:  Because you've worked hard to create a secure and comfortable lifestyle for your family, you'll want to ensure that you have a sound financial plan that includes trust and estate planning. With some forethought, you may be able to minimize gift and estate taxes and preserve more of your assets for those you care about.

A qualified financial professional and tax professional can help ensure you are minimizing taxes and maximizing gains for your heirs. You can bring this four-part checklist to your initial meeting to discuss how to make your plan comprehensive and up-to-date.

Part 1: Communicating your wishes

•Do you have a will?

•Are you comfortable with the executor(s) and trustee(s) you have selected?

•Have you executed a living will or healthcare proxy?

•Have you considered a living trust to avoid probate?

•If you have a living trust, have you titled your assets in the name of the trust?

Part 2: Protecting your family

•Does your will name a guardian for your children if both you and your spouse are deceased?

•If you want to limit your spouse's flexibility regarding the inheritance, have you created a Q-TIP trust?

•Are you sure you have the right amount and type of life insurance for survivor income, loan repayment, capital needs, and all estate settlement expenses?

•Have you considered an irrevocable life insurance trust to exclude the insurance proceeds from being taxed as part of your estate?

•Have you considered creating trusts for family gift giving?

Read the rest of this article here.

No Better Holiday Gift Than Asset Protection!

Law Firm Newswire: It might not be something your children can pull out from under the tree and unwrap this holiday season, but the gift they may appreciate the most is the gift of asset protection.

“With family as the focus of so much attention during the holidays, it’s a natural time to consider their financial security,” said Brandon estate planning attorney Reginald Osenton. “No matter what age your children are, the time is never wrong to plan for the future.”

Even though most people tell their loved ones how they want their estate managed when they are gone, the only way to ensure it is done correctly is to put it in writing. “We put together plans for families so that when the time comes, everybody is taken care of exactly the way you want,” Osenton said.

A properly drafted estate plan with a qualified attorney will save your family money in the long run in future taxes, legal fees and other costs. It can truly be a holiday gift that will pay for itself.

Too many families are consumed by unnecessary stress and tension when it is time to divide an estate. Careful planning can eliminate all of the finger-pointing and he said, she said. “I have seen families fight over the smallest things. And it all could have been avoided if it had been planned out before hand,” Osenton said.

While a detailed will is the cornerstone of a good estate plan, health care issues can be handled before they arise as well. A power of attorney and a health care surrogate designation will let you determine now who will be making the decisions if […]

2011-12-16T13:15:11-08:00December 16th, 2011|Estate Planning, Estate Tax|

Understanding the Impact in 2012 & 2013 of Federal Estate Tax Laws

Estate planning attorneys Cecil Smith and Carol Gonnella have written an informative article about the coming impact of federal estate tax laws next year and the year after.  The article starts:

“The estate tax laws are in a state of flux, and no one is sure what Congress will do in the near future. This article is about the laws today, and the importance of planning now rather than waiting until Congress may … or may not … act. It addresses tax liability in a broad sense, and does not take into account the impact of state death taxes, if any, or the implementation of advanced estate planning strategies such as LLCs, QPRTs, BERTs, ILITs, GRATs, Charitable Gifts, etc, to not only creditor protect assets during life, but to reduce or eliminate the estate tax bite upon death. . . . There are three ways to reduce (or even eliminate) federal estate taxes just by using Internal Revenue Code exclusions and/or exemptions that are available to everyone

  1. The Unlimited Marital Deduction . . . .
  2. The Basic Exclusion Amount . . . .
  3. Portability . . . . “

2017-10-07T11:14:45-07:00December 1st, 2011|Estate Planning, Estate Tax|

‘Perfect Storm’ For Estate Planning

Investment News:  Politics, the weak economy and low interest rates have combined to create one of the best environments for estate planning in a generation, according to experts. “If individuals are trying to transition assets to the next generation, we currently have a perfect storm — in a good sense — to do it,” said David Scott, vice president of advanced sales for Penn Mutual Life Insurance Co.

The elements of that perfect storm begin with a $5 million exemption from estate taxes ($10 million for married couples), which was part of the Middle Class Tax Relief Act of 2010 enacted in December. The value of real estate assets and securities are at low levels, making it more attractive to give such assets to other individuals. And with interest rates near zero, wealthy clients also can make loans to their children and to trusts at a very low cost.

2016-12-13T20:33:38-08:00November 8th, 2011|Estate Planning, Estate Tax|

Does The Estate Tax Hurt The Poor?

Estate of Denial:  I’m sure there’s a lot to be said for rich people, but they sure do consume a lot of resources. I wish they’d leave more for the rest of us. That’s why I oppose the death tax.

The death tax sends a powerful message to rich people: “You can’t leave everything to your heirs, so spend now, before it’s too late. Burn more fuel. Demand more timber for your mansions, more steel for your private planes, and more fiberglass for your yachts.”

Then all those resources—the fuel and timber, the steel and fiberglass—become unavailable to build factories, so the rest of us get worse jobs at lower wages. Those resources are unavailable to build farm equipment, so we all pay higher food prices. They’re unavailable to build roads and schools and hospitals.

I don’t begrudge anyone the fruits of his labor. But the death tax encourages people to pick extra fruit, leaving the trees a little barer for the rest of us.

2011-11-01T10:00:32-07:00November 1st, 2011|Estate Tax|

IRS Gives Relief From Filing Deadline For 2010 Heirs

Forbes.com: On September 13, 2011, the IRS released Notice 2011-76, which gives executors of estates of 2010 decedents more time to make an informed decision about whether to stay in the default estate tax regime for 2010 or opt out of the estate tax entirely.

The estate tax was repealed for most of 2010. But on December 17, 2010, President Obama signed a law that reinstated the estate tax retroactive to January 1, 2010. This law set the estate tax at a rate of 35% and provided an estate tax exemption of $5 million.

In a move that helped wealthy beneficiaries, including the beneficiaries of some billionaires, lawmakers made the estate tax in 2010 an optional, default regime. Executors of the estates of 2010 decedents can opt out of the estate tax by filing a special form—Form 8939 (Allocation of Increase in Basis for Property Acquired From a Decedent).

2011-09-15T08:51:07-07:00September 15th, 2011|Estate Tax|

Annuities And Estate Planning

Wealth Strategies Journal:  The Law of Unintended Consequences generally holds that human conduct will produce at least one unintended consequence over a course of time and during a series of activities or transactions.

Disclaimer: Material is presented here for general information purposes and does not constitute legal or tax advice. The intent of the material is to provide some insights into the issues which can arise when proper due diligence and qualified counsel may be somewhat absent during the annuity sales process.

The law of unintended consequences is an adage or idiomatic warning that an intervention in a complex system always creates unexpected and often undesirable outcomes. [wikipedia.org] In the financial world there are few better examples of a “complexity” than annuity contracts.

When annuities intersect with trust drafting by estate planning attorneys, expect the unexpected. A few case histories from the file will illustrate the point and serve as harbinger of advisory challenges.

 

 

2017-10-07T11:14:45-07:00September 1st, 2011|Estate Planning, Estate Tax, Trusts|

Estate Planning Steps To Start Today

Tulsa World: Everybody's going to die – so why not think about estate planning now and beat the rush?

Even if you're not wealthy, it's still important to plan for what will happen to your valuables and property after your death.

All the legal terms you'll run into along the way to understanding the estate planning process will confuse and even overwhelm you – unless you use the Federal Citizen Information Center to bone up on the lingo and get ready to protect your wealth for your family.

 

2017-10-07T11:13:36-07:00August 4th, 2011|Estate Planning, Estate Tax, Wills|

Ways to Steer Clear of State Death Taxes

Wills, Trusts & Estates Prof Blog:  Twenty-two states and the District of Columbia currently impose a death tax on their taxpayers. These taxpayers have options when it comes to avoiding paying these taxes, however.

One option is to make a large lifetime gift. The current federal law grants taxpayers a $5 million gift exemption ($10 million for married couples). Another option is to make annual exclusion gifts. Taxpayers can give an unlimited number of people gifts up to the annual exclusion amount ($13,000, currently) without incurring a gift tax.

2011-07-19T08:17:04-07:00July 19th, 2011|Estate Planning, Estate Tax|

Estate Planning in 2011-2012

Smart Money:  You have to hand it to Congress: It's doing its best to turn one of the more wearying parts of retirement planning — getting your estate in order — into something of a party. The challenge for you and me is to stay clearheaded.

The Tax Relief Act of 2010, passed in December, made headlines primarily for retaining the Bush-era income tax cuts. But lawmakers also approved changes in estate and gift taxes that left lawyers and accountants gushing. (“Unprecedented.” “Historic.” “Astonishing.”) Most notably, the gift-tax exemption jumps from $1 million to $5 million, which means Americans can now bequeath the latter amount without paying a dime in taxes. This exemption is separate from the annual gift-tax exclusion, currently $13,000.

2016-12-13T20:33:45-08:00July 8th, 2011|Estate Planning, Estate Tax|

Life Insurance Trusts

Online Athens:  The new estate tax laws have provided a false sense of security for those of us who do not have an estate worth more than $10 million. However, in 2013 we are going to be revisiting the issue of estate taxes all over again as the law sunsets back to the $1 million estate tax exemption.  The sunset provision makes the estate tax law an average taxpayer's problem again.

Since life insurance benefits often are the largest asset in an estate, I would like to address the great myth about the taxation of life insurance benefits.

2011-07-05T09:18:24-07:00July 5th, 2011|Estate Tax, Trusts|

The Year of the Ginormous Loophole

Wealth Strategies Journal:  “But the estate tax repeal did take effect in 2010, and an enormous  rift in the transfer tax system opened just long enough for the estates  of several billionaires to pass through.  Let's take a look back at 2010.”

2017-10-07T11:13:35-07:00January 10th, 2011|Estate Tax|
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