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Estate tax law uncertainty: Keeping your plan on track

June 20, 2012

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If Congress allows current rates and exemptions to expire at the end of 2012 as scheduled, your family could lose significant amounts of wealth to gift, estate and generation-skipping transfer (GST) taxes. But Congress may extend current exemptions and rates or take other action.

Because of this uncertainty with estate tax laws, you need to make sure you’re on the right track. If your estate exceeds $1 million — or you and your spouse’s estates combined exceed $2 million — consider whether you should make gifts this year.

As long as you don’t exceed your $5.12 million exemption (less any taxable gifts you’ve previously made), you won’t owe any tax on the gifts. This likely will remove the assets from your taxable estate and, at minimum, will remove their future appreciation. Note, though, that in certain circumstances gifts made in the past might be included in your estate. So it’s important to understand the consequences of making the gift. And, before making a gift, be sure that doing so won’t jeopardize your own financial security.

During these uncertain times, it’s also important to regularly review your estate plan. Make sure it takes maximum advantage of current estate tax law, and yet still has the flexibility to adapt to future estate tax law changes.

For example, if your estate plan includes a credit shelter trust to protect both you and your spouse’s estate tax exemptions, make sure the plan allows you to take maximum advantage of the available exemption while still providing the surviving spouse sufficient assets to maintain his or her lifestyle.

Minimizing taxes is only one aspect of estate planning, but it can help you achieve other goals as well — such as providing for loved ones or supporting charity. That’s why it’s important to make the most of available tax breaks and be prepared for future estate tax law changes.

Gift, estate and GST tax changes
2012 2013
Exemption $5.12 million $1 million*
Top rate 35% 55%

*GST tax exemption will be indexed for inflation.

 

Larry Powell, CPA, CFP, CDFA, is a Shareholder at CSH and specializes in Estate, Gift, and Trust tax areas. He can be reached at [email protected]

Mark Gaudet, CPA, CFP, is a Principal Accountant providing services to corporate executives, high net worth families and closely-held businesses and their oweners. He can be reached at [email protected]

All content provided in this article is for informational purposes only. Matters discussed in this article are subject to change. For up-to-date information on this subject please contact a Clark Schaefer Hackett professional. Clark Schaefer Hackett will not be held responsible for any claim, loss, damage or inconvenience caused as a result of any information within these pages or any information accessed through this site.

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