STRATEGIES TO TAKE ADVANTAGE OF 2012 ESTATE PLANNING OPPORTUNITIES
The window of opportunity to make large gifts in a tax-efficient manner is scheduled to close at the end of this year. Perhaps you are already considering making significant gifts this year or are being advised by your friends, family members or advisers to make these gifts before it is "too late" to do so come 2013. The discussion below summarizes why 2012 may provide a special opportunity to make large gifts and planning options that take into account some related issues.
The 2012 opportunity
The current federal estate and gift tax exemption and the generation-skipping transfer ("GST") tax exemption for each individual is $5,120,000 (resulting in up to $10,240,000 of exemption for married couples). Absent congressional action, on January 1, 2013, the estate and gift tax exemptions are scheduled to revert to $1,000,000 and the GST exemption is scheduled to be about $1,400,000. In addition, in 2013 the current top transfer tax rates of 35 percent would increase to 55 percent. Of course, there are other possible legislative outcomes. The bottom line is that if the gift, estate and GST exemptions in future years are, in fact, less than the current $5,120,000, making large gifts before the current law sunsets at the end of the year may provide significant estate tax savings later.
What if you are not sure you want to give away so much of your wealth?
You will want to take many factors into consideration in deciding how much you can afford to give away and, just as important, would be comfortable giving away. Below are several strategies that may increase your level of comfort in making large gifts in 2012.
What if your disposable assets are not the "ideal" type to use to make gifts?
There is no single type of asset that is the best to use in making gifts in all contexts. Gifts of cash are easy to make, are easy to value and have no built-in appreciation. But what if your disposable assets consist largely of low-basis stock? Or if your assets are illiquid, as may be the case if a significant portion of your net worth consists of real estate, works of art or a family business? In such a case, you may wish to consider one of the following strategies.
What if you are afraid of having "too much" end up in the hands of your children?
For any number of reasons, you may feel inheriting more than a certain amount of property could be detrimental to your children and their own families, and you may have qualms about making gifts of the full 2012 gift tax exemption amount of $5,120,000 (or $10,240,000 for married couples). While you need to decide what will be right for your family, there are several ways to address this concern using a trust.
Please let us know if you would like to discuss making gifts before the end of the year.
President Obama's budget plan for fiscal year 2013, released in February of this year, proposes a number of changes to the estate, gift and generation-skipping transfer ("GST") tax laws. Although many of the changes have been proposed in the past without being enacted, these proposals are likely to be among the items under consideration as Congress contemplates the looming increase in federal transfer taxes next year. The following summarizes the key proposals in the budget plan:
These proposals have not yet been introduced as legislation and would not take effect until next year, so no immediate action is necessary. However, if you have not updated your estate planning documents in the past few years, this may be an appropriate time for a more comprehensive review of your estate plan to ensure that it still meets your estate planning needs and objectives.
Day Pitney Special Needs Planning attorneys Meredith Greene and Ken Shulman presented at the Fidelity Wealth Management webinar, "Planning for a Loved One with Special Needs," on November 30.
Individual Clients Attorneys Carl A. Merino, Dina Kapur Sanna and Sarah B. Jacobson co-authored an article for Trusts & Estates Magazine titled, "Pre-Residency Planning for Your Client's Trust."
Trusts and Estates attorneys Joshua Caswell and Leigh E. Furtado co-authored the article, "NFTs for Estate Planners: Not Just a Token Concern," for Probate & Property Magazine.
On August 2, Day Pitney Counsel Heidi A. Seely presented at "Estate Planning: MCLE BasicsPLUS, Initial Steps, Fundamentals and Estate Planning Documents," hosted by MCLE.
Of Counsel Michael Pfeifer served on the panel, "Integrated Asset Protection," a webinar hosted by Respada on July 29.
Trusts and Estates Attorneys Joshua Caswell and Leiha Macauley testified on November 16 before the Massachusetts Legislature's Joint Committee on the Judiciary.
Sandra M. Ferrera was featured as a "Wonder Woman 2021" in the Boca Raton Observer. Ferrera advises clients on high-end residential and commercial real estate transactions, helping to make their assets work for them.
West Palm Beach Partner Tasha Dickinson was featured in a video interview by Invest: Insights titled, "Estate Planning in the COVID-era," and shared that the pandemic allowed people to revisit and restructure estate planning strategies.
New York Partner Dina Kapur Sanna from our firm's Individual Clients department has been recognized on Citywealth's Top 100 Private Lawyers 2021 List.
Day Pitney Press Release