RLHCPA

Take Time to Review Your Estate Plan

04/10/2013

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The "Taxpayer Relief Act" signed on January 2, 2013, permanently sets the estate and gift tax exemption at $5,000,000 and the top tax rate at 40%. The exemption amount is adjusted annually for inflation, which puts the 2012 exemption at $5,120,000 and the 2013 exemption at $5,250,000. The annual gift tax exclusion for 2013 is set at $14,000 per recipient.

Now that the rules have been made "permanent," take the time to review your estate plan to make sure it still accomplishes your wishes.

With the higher exemption amount, fewer estates will be subject to tax, and perhaps yours falls short of the tax threshold. But regardless of the size of one's estate, everyone needs the following basic documents - updated for the current rules and your particular circumstances:
  • A will that specifies who is to inherit your assets and who is to be the guardian of any minor children you have.
  • A power of attorney naming someone to handle your financial affairs if you become disabled or seriously ill.
  • A health care directive (living will) stating your wishes should you become terminally ill or permanently unconscious.
  • A financial inventory listing such things as bank accounts, income sources, insurance policies, and other assets.
Your estate plan review should include checking your exposure to state inheritance taxes and an update, if needed, to beneficiary designations on such things as IRAs and insurance policies.

For help in getting your estate plan in order, please contact us and your attorney.
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Estate Taxes Might Not Affect YOU, But YOU Still Need a Plan

05/06/2011

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There’s good news if you’re concerned about estate taxes. For the next two years (2011 and 2012), the value of your estate that’s excluded from tax is set at $5 million. And the top rate on taxable estates is 35%.

The $5 million exemption is per person, thus a couple’s exemption is $10 million. Also notable in the law is the new portability of unused exemptions. Under prior law, couples frequently performed complex estate planning to take full advantage of the then $7 million exemption for couples. Now the law allows a deceased spouse’s estate to transfer any unused exemption to the surviving spouse without all the complex planning.

So what should a taxpayer do to take advantage of the current rules? First, estimate the size of your estate and if you may be subject to taxes, consult us and your attorney for planning options. For example, you might consider taking advantage of the favorable gifting and generation skipping tax exemptions by making tax-free gifts to planned beneficiaries now. It’s important to realize that not only will planning for these events minimize potential estate tax, but also you will be preserving assets for your family.

If your estate is under the tax threshold, don’t assume that you can just ignore estate planning. If you have a plan in place, you should review and update it at least annually. First, your financial situation might have changed. Or there could be changes among your heirs or beneficiaries. Think of all the births, marriages, deaths, and divorces in your extended family during the last year.

If you don’t have an estate plan, establish one as soon as possible. A plan is not just about avoiding estate taxes. At a minimum you need the following:
* A will or trust to specify who will inherit your assets and to appoint a guardian for any minor children.
* A medical directive or "living will."
* Health care and financial powers of attorney.
* Updated beneficiary designations for insurance and pension assets.

For help calculating the value of your estate, or to learn more about how estate taxes might affect you, please contact our office.
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