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.
Dina Kapur Sanna will be speaking on two panels at International Estate & Tax Planning 2019, a conference presented by the Practising Law Institute and held in New York, NY.
Carl Merino spoke on a panel, "Non-Residents Acquiring Real Estate: Compare & Contrast Between the U.S. & UK," at the U.S.-UK Tax Planning conference, presented by KNect365 and held in New York, NY.
Day Pitney LLP hosted its annual invitation-only Palm Beach Family Office Forum at the Eau Palm Beach.
On March 27, Warren Whitaker will be speaking on "Passing Down Your Prized Possessions: How to Avoid Fights and Fees In Your Estate," a seminar hosted by the New-York Historical Society's Planned Giving Advisory Council and held at the Robert H. Smith Auditorium in New York City.
Warren Whitaker will be serving as chair of the 15th Annual International Estate Planning Institute, hosted by the New York State Bar Association and The Society of Trust and Estate Practitioners USA (STEP USA).
Day Pitney attorneys Tina Albright and Rebecca Tunney have been shortlisted for "Best Female Advisors & Managers in the USA" for New York and Boston, respectively, as part of the U.S. Powerwomen Awards by Citywealth.
Day Pitney Press Release
Day Pitney's Family Office and Trusts and Estates practices have been shortlisted in two categories, "Best Private Client Law Firm" and "Best Trusts and Estates Division," for the 2019 Private Asset Management Awards.
Day Pitney's Family Office and Trusts and Estates practices have been shortlisted in the "Legal Team of the Year" private client category for the 2019 Family Wealth Report Awards.
Darren Wallace was quoted in an article, "Paul Allen's $26 Billion Estate Will Take Years to Unravel," published by Bloomberg.