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Prepare Now for Estate Tax Law Changes
Prepare Now for Estate Tax Law Changes
The nonstop discussion of health care reform and the economy this year crowded out discussion surrounding estate tax law sunset, due to expire December 31, 2009. However, it appears likely the estate tax will be continued at 2009 levels through 2010. What does this mean? More than likely, as of this writing, the 2010 estate tax top rate will be 45 percent and the exemption will be $3.5 million per person.For now, conservative Congressional lawmakers dream of killing the estate tax seems to be dead, at least through 2012. The ever expanding federal spending continues, fueling the need for every tax Congress can dream of and maintain. That means it’s a good time to talk to tax and financial experts about the best ways to pass your holdings to the next generation no matter what happens with the future of the “death tax.”
If you suspect your estate or the estate of relatives you might inherit from may fall prey to the estate tax, it makes sense right now to enlist the help of experts. Assets may be expected to grow over time, and your estate may turn out to be larger than you may think. You should be talking to board-certified estate planning attorneys, as well as fiduciary, fee-only CFP® professionals for solutions to estate tax issues. This is one area where solutions are readily available, procrastination being the largest tax due to your inaction.
Here are some things to keep in mind as you prepare for those conversations:
Give during your lifetime: You can now give $13,000 per calendar year per recipient without paying gift tax or affecting your 1 million dollar lifetime exemption. You can also pay someone's tuition or medical bills directly, or give to a charity, without paying gift tax on the amount, thereby reducing the size of your estate and your eventual estate tax bill after you die.
Check whether your state charges an estate tax: Roughly half of all states charge estate tax, and that’s a recent thing. States previously received a slice of the federal estate tax, which no longer happens, so it’s important to consider the state’s impact when making an estate plan.
Think about a life insurance trust: Whether you need it for estate liquidity or for other purposes, an irrevocable life insurance trust can be created to keep the proceeds of the insurance out of your taxable estate. An added benefit is that such trusts may permit spousal access to the cash value of the policy. Yet note the word “irrevocable” – it means a decision that cannot be changed.
Know if your assets are expected to increase: A grantor-retained annuity trust, or GRAT, is an irrevocable trust popular among families with assets expected to appreciate in value. Such appreciation can be passed on to heirs with minimal tax consequences with proper estate planning.
The bottom line remains it is always better to have an estate plan, than not to have one! Today, make an appointment to have your wills, power of attorney, directive to physicians, guardianship, and power of attorney for health care drafted by a competent estate attorney in your state. It also pays dividends to consult with your fiduciary fee-only advisor in advance, as this individual can aid in sorting through the many decisions to be made in your estate planning. Begin 2010 on a good note by taking care of this for your family!
