We now know what the federal estate tax laws will be this year and in the future. Our federal government has stated that these estate tax rules are now permanent after a decade of uncertainty. (A cynic may say that these federal tax laws are permanent until our federal government says they are not!). Anyway, here are some of the more important federal estate tax law changes made on December 31, 2012 along with some related estate planning strategies:
Final Thoughts and Recommendations:
Federal Estate Tax Implications: The federal estate tax law changes provide for some very generous federal estate tax breaks. For those close to or above the federal estate tax threshold, the discussion above has explored some of the many planning opportunities to save federal estate taxes. Such taxpayers should not rely on portability and should meet with an estates attorney to plan the proper course of action based on their particular family situation, needs and goals.
Shift In Focus To State Inheritance Tax Matters: Taxpayers below the federal estate tax thresholds also must continue to plan but the tax focus needs to shift to minimizing state inheritance taxes.
Create An Estate Plan That Fits Your Particular Family and Financial Situation: It is most important to recognize that everyone has a unique situation with various assets, family members and ideas on how their family members are to be provided for and who should be in charge once they are gone. As a result, all taxpayers still need to set up an estate plan for non-tax issues such as making sure their assets go to their loved ones in the way they wish. They need to choose the proper people to administer their estates and any trusts they create.
Young Families: In younger families, determining a proper guardian for their children and setting up trusts for the protection of their assets and a distribution scheme for such children is of paramount importance and has little to do with taxes. An objective and unbiased assessment of how much life insurance is required is often needed.
Second Marriages: Many with second marriages face unique challenges. An estate plan needs to be developed and implemented to meet the diverse needs and goals of such blended families.
Special Needs Trust: Those with disabled children or those receiving government benefits may need special needs trusts.
Do Not Try This On Your Own: Get an Experienced Estate Attorney: Having experienced estate counsel explore these issues and offer various strategies is at the heart of estate planning. Coordinating probate and non-probate assets into an integrated estate plan is often overlooked and little understood.
Attention To Details and Documentation: Finally, make sure that you have an experienced estate attorney that can create an integrated estate plan. Such attorney should have the skills to draft appropriate wills, trusts, durable powers of attorney, living wills and other related documents tailored to your specific family and financial needs.
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