What Do The New Estate Tax Laws Mean To You?

By now you have probably heard that on December 17, 2010, Congress increased the estate tax exemption to 5 million dollars. You may also have heard the new term “portability” thrown about; read that the estate, gift, and GST taxes have once again been “reunified” at the 5 million dollar level; and that this is a 2 year fix indexed for inflation with a return to the $1 million level in 2014.

What has gotten much less publicity is the 3.8% surtax added on investment income for couples with AGI greater than $250,000 which is part of the Health Care bill and effective in 2013.

What does this mean for you?

1. You may now need a Life Insurance Trust. I have always held that life insurance and Irrevocable Life Insurance Trusts (ILITs) are a valuable tool, and I am even more convinced of this now. In fact, ILITs are even more desirable than before if you have wealth you intend to use primarily to create a legacy for your descendants.

Decision making no longer needs to be driven by the estate tax rules. And if you are thinking of waiting you have to consider that you don’t know if you will be medically qualified for life insurance a year or 2 years from now. It’s best to act now, and we can design trusts that will shield the proceeds from taxation in your estate while giving you access to the accumulated cash surrender value if circumstances change.

Life insurance remains the single best strategy for a healthy person to create a large legacy that eliminates the stress of a volatile investment strategy. And now policy premiums can be paid in advance and avoid the complexities of Crummey letters and hanging powers, and existing policies with large cash values can be transferred to ILITs to avoid potential taxation.

2. As much as I believe in ILITs, they are not your only option for Legacy Planning: Family partnerships, GRATs and other strategies can also be structured and more economically implemented to take advantage of the temporary uptick in the exemption amounts.

3. It is open season on outright gifts and gifts to dynastic trusts now that you have the opportunity to make tax free gifts up to 5 times larger than in the past. The multiplier effect for 2 or more generations will be astonishing!

4. The 3.8% surtax also makes pushing investment assets down to lower generation members in lower tax brackets an important income tax plan for multi-generation families.

5. Achieving creditor protection using spousal limited access trusts and lifetime QTIP trusts has become a tantalizing opportunity.

6. Portability, however, is a trap for the unwary, as is the increased federal exemption that may destroy your existing estate plan if you have a blended family or other targeted planning in place. Formula gifts to charity may disappear from your plan unless you make changes.

Your legacy is important, and now is the time to consider changes to your plan and to implement those changes you have considered–but avoided–until now.

If “getting it right” is important to you (as it should be); then planning right now is indispensable. To learn more about these Legacy Planning techniques — or any other estate and tax strategies –call me today.

2017-12-01T16:26:27+00:00 By |Areas Of Practice, Estate Planning, Irrevocable Trusts, News|Comments Off on What Do The New Estate Tax Laws Mean To You?

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