It would be an understatement to say that the federal estate tax is in a state of flux. The current rules, with the generous $5 million individual exemption ($10 million for a couple), expire at the end of 2012. Last month, the Treasure Department released the “General Explanations of the Administrations’ Fiscal Year 2012 Revenue Proposals,” also known as the “Greenbook.” Perusal of the Greenbook reveals that the Obama Administration will be seeking to make some big estate tax changes. Return the Gift, Estate, and Generation-Skipping Transfer (GST) taxes to 2009 levels. The Greenbook proposes that in 2013 the exemptions…
Purchasing life insurance in an amount sufficient to cover an estate tax liability has long been a staple of estate planning strategy. But with so many escaping federal estate taxes under the new tax law, families are starting to re-examine their need for life insurance obtained to help heirs pay the tax. Faced with continuing premium payments, many are asking whether they need to keep the insurance. You should think twice, though (and get some professional advice) before giving up your policy. The Wall Street Journal recently advised readers to consider keeping life insurance. First – realize that the “death…
As budget debates continue to escalate, yet another estate planning tool has come under fire, reports The Wall Street Journal. If you’re interested in a “Dynasty Trust” you may want to act sooner rather than later. The main objective of a Dynasty Trust is to continue for as long as possible, benefiting several succeeding generations. Usually, beneficiaries are allowed access to income only, so the trust’s principal assets remain intact to provide an income stream for future generations. Dynasty trusts have become increasingly popular since the 1986 tax overhaul and the current version of the “generation-skipping tax.” (GST). The GST…
It certainly is understandable that no one enjoys a conversation about death – especially their own! And, with the estate tax exemption now set at $5 million for an individual and $10 million for a couple, many people may believe they have no reason to consult an attorney about their estate planning. But avoiding the topic of estate planning can mean unnecessary expense, confusion and conflict. SmartBusiness last week highlighted the fundamentals of a “well-thought-out estate plan,” with topics that everyone should consider – whether prince or pauper. Why do you need an estate plan? A comprehensive estate plan ensures…
SmartMoney recently ran a reminder to all possible victims of the estate tax. The fact is that you could have a taxable estate, and not even realize it. Most people assume that since they don’t “feel” wealthy, they don’t have to worry about estate taxes — but they don’t actually do the math. Your “taxable estate” includes (minus liabilities): proceeds from life insurance policies; your primary residence and any vacation and/or rental properties; retirement accounts, investment accounts; cars, furniture, collectibles, and the rest of your “stuff.” Plus any private business ownership interests (such as shares in a family business or…
As a recent Wall Street Journal Article points out, taking advantage of the low gift tax levels (while you still can) could save your family business a hefty amount in potential estate taxes. But transferring ownership can raise complicated succession and estate planning issues that you should consider carefully before giving away any stock. The recent tax law changes brought the gift tax threshold up to $5 million for an individual and to $10 million for couples in 2011 and 2012. Yes, that means you can give away that much now, without incurring a penny in gift tax. But, since…
As the old saying goes, “If you’re giving while you’re living, then you’re knowing where it’s going.” But the new tax legislation passed in December makes gifting even more attractive for wealthy families. A recent article in the Wall Street Journal, “The $5 Million Tax Break,” points out why lifetime gifting is suddenly so attractive under the new laws. It’s a good article, worth reading, but here are the high points, in a nut-shell: For the next two years, the gift-tax exemption jumps to $5 million from $1 million for individuals, and to $10 million (up from $2 million) for…
The tax cut extension package does dramatically change the game for everyone – married couples and singles alike – in terms of estate tax planning. In fact, that tidbit is probably the most important thing you should remember about the new legislation – it made significant changes to the estate tax law. The very fact that things have changed (again) means your estate planning probably should be reviewed.The federal estate tax exemption is now $5 million, with a 35 percent applicable tax rate on the remainder. This means that if you are a single person with an estate of less…
Sometimes the estate tax isn’t all that bad, and according to a recent Smart Money article it may actually be better to choose it over no tax at all! Why would anyone want to subject an estate to taxes if they could opt out? There actually are some pretty sound reasons to consider this. The new tax law gives estate executors (for 2010 estates) the choice between estate taxes and the right to use the new estate tax law. Here’s why some executors may choose to use the new federal estate tax law instead of avoiding estate taxes altogether: stepped-up…
The speculation won’t be over until the final bill is written up, passed, and signed into law, but with prospects looking reasonably good for the Obama Tax Proposal, it may be time to review your year-end tax planning. Reuter’s is ahead of the game and recently listed their top three suggestions: Timing on deductions and income: If you thought you were going to see increased taxes in 2011, you may have planned to push income forward into 2010 and deductions back into 2011. With the Bush-era tax cuts extended to all income brackets this won’t be the case and…
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