Although The Tax Relief Act of 2012 provides permanent lifetime gift and estate exclusions of $5.25 million, legislation governing exclusions has changed seven times in the last ten years. Consequently, persons with sizeable estates who did not take advantage of their entire exclusion prior to December 31, 2012 should sit down with their professional advisors in 2013.
Below are a few estate planning tools and strategies presently being recommended by estate planners, accountants, and financial planners.
1.?Incorporating a protection provision in your trust documents which facilitates amendments to comply with any type of new legislation in the future.
2.?Lock in the ?Dynasty? planning options in your trust documents that enable wealth to be insulated from taxes and other hazards over multiple generations.? Non-tax issues like divorce, substance abuse, litigation, medical disasters, and business failure destroy as much wealth as taxes.
3.?Be aware and prepared should legislators adopt devices to increase taxes in order to avoid bankruptcy of the U.S. such as:
- Phasing out more exemptions;
- Implementing means testing for retirement plan withdrawals;
- Placing caps on deductions such as charitable giving;
- Limiting the duration of grantor retained annuity trusts;
- Limiting the number of years a trust can skip generations without transfer taxes;
- Implementing carry-forward cost basis at death enabling the IRS to collect more? capital gains taxes;
- Eliminating grantor status for trusts resulting in taxes at the higher trust rate;
- Including ?grantor trusts? in the taxable estate which would make many life insurance trusts taxable; and
- Eliminating installment payments of estate taxes.?
4.?Make sure you confer with all of your professional advisors before amending your estate planning documents.? Too many so-called estate plans leave gaps in the protection because there is little or no connection between the business and property structures and the estate structures, or because the accounting, legal, investment and insurance advisers are each doing their own thing without coordinating with each other.? Effective planning is a team event that covers the whole field for the entire game.? One star player making one good shot may look good for the moment, but it won?t win the game.? Don?t ever forget that you are the quarterback regardless of your level of knowledge.? Keep your advisors in the game.
Gary Ringel, CGREA
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