Estate Planning is an Ongoing Process: Tips You Need to Keep in Mind for 2013
All trust attorneys and financial advisers aggressively forewarned clients of the possibilities of major tax increases in 2013, but it seems Congress averted going over the fiscal cliff with a last minute resolution.
The Senate on New Year’s Eve and then the House of Representatives the following day passed a bill that was a significant compromise by both Democrats and Republicans. The bill has three major components that should be noted. First, it makes tax cuts for individuals earning less than $400,000 per year and couples earning less than $450,000 from the Bush administration permanent. Second, it makes income that exceeds that threshold taxed at a rate of 39.6%. Third, with respect to estate taxes, the bill will maintain the $5 million lifetime gift and estate tax exemption, but the rate on income that exceeds the exemption has increased from 35% to 40%.
However, just because legislators acted in time to help citizens avoid some financial planning issues in 2012, it doesn’t mean we should sit back and postpone taking care of some major estate planning goals early in 2013. Life changes and estate planning is an ongoing process that should not be cut off by a date on a calendar.
Here are some situations to ponder while preparing an estate throughout 2013:
1. Life events such as birth, death, marriage, divorce, remarriage, etc. are all possibilities
that require estate planning modifications.
2. Effective planning of tax-free gifts.
3. Taking advantage of the $5 million lifetime gift, estate & generation-skipping transfer tax
4. Consider creating a trust because it can prevent the court from controlling your assets
5. Review guardianships if you have children.
6. Review beneficiary and trustee designations in wills, trusts and insurance policies.
Don’t let the bill passed by Congress early this year stop you from thinking about the future of your estate. As they say, failing to prepare is preparing to fail.
Written by Joseph Zebrowski, JD