September 2012, Volume 1, Issue 7

TopfiveTOP FIVE 2012 ESTATE PLANNING RECOMMENDATIONS: Here's our advice for what really needs to be done before the year ends

The lazy days of summer have given way to the hustle and bustle of the school year.  All parents know that once the school year has begun, the holidays and the New Year approach all too quickly.  Of course, the end of the calendar year also marks the end of the tax year, and there are steps that you should consider taking with regard to planning your estate before the 2012 tax year ends. 


1.   Everyone:  Review your will.


Review your will, especially if it's more than five years old, in light of life changes such as marriage and divorce, addition of children and grandchildren, etc.  Also review your will for formula clauses.  A common provision called a formula clause may leave completely different amounts to one's spouse and children in different years when the clause is tied to the lifetime exemption amount.


2.   Everyone:  Review life insurance policies.


Review life insurance policies and retirement accounts for correct beneficiary designations.


3.   If your estate is under $1 million:  Review retirement and long-term care plans.


In addition to reviewing wills, focus on planning for adequate retirement resources, and if over 50, planning for future long-term care.  Estate taxes are not expected to be an issue at this level.


4.   If your estate is between $1 million and $5 million: Put a gifting strategy in place.


Estate taxes are a possibility at this level and the use of gifting, trusts, and life insurance planning should be considered.  Gifts made during lifetime are a useful tool in removing the assets from one's estate.  Every person is permitted to gift $13,000 per year, without having to report these gifts.  Gifts above this amount are required to be reported on a gift tax return, and will count toward the person's lifetime exemption. Again, the gift exemption is scheduled to drop to $1,000,000 at the end of this year  


5.   If your estate is over $5 million:  Implement an aggressive gift strategy to take advantage of expiring $5 million exemption.


Estate taxes are a possibility.  At this level of net worth, more aggressive gifting strategies can be considered, including generation-skipping transfers.  Planning with trusts may be appropriate, especially when there are children from a previous marriage.  Certain trusts allow the first spouse to die to direct who receives the assets, while providing income to the surviving spouse for his or her lifetime.  In addition, life insurance needs should be assessed. 


If your situation requires all the tools currently available, we would be happy to have a conversation to answer your questions and help guide you to an estate plan that makes sense for your individual and family circumstances.


If your situation requires all the tools currently available, we would be happy to have a conversation to answer your questions and help guide you to an estate plan that makes sense for your individual and family circumstances. 


Call or email our office. We are here to answer your questions.

ProvisionsPROVISIONS THAT WILL EXPIRE ON 12/31/12: Act now or you could miss a valuable opportunity

Two beneficial tax opportunities in the estate and gift area will expire this year on December 31, 2012, unless Congress acts before then to change them.  


$5,000,000 Exemption

The federal government imposes taxes on the transfer of assets to others, either at death or during lifetime.  The federal estate tax is imposed upon transfers at death.  The federal gift tax is imposed upon lifetime transfers to others.  Illinois also imposes its own estate tax.


For 2011 and 2012, Congress set the lifetime exemption amount - the amount that can pass to heirs free of tax - at death or through gifting at $5,000,000. (In 2012 it is inflation indexed to 5.12M).  The maximum tax rate above the exemption amount is 35%.  On December 31st  of this year, the exemption drops abruptly to  $1,000,000, and the maximum tax rate jumps to 55%.  Read more>>



Congress introduced a new concept for estates of married individuals dying in 2011 and 2012, called "portability."  What this does is allow estates of the first spouse to die with less than $5,000,000 to elect to transfer the unused portion of the exemption to the surviving spouse, to be available for use in later years by the surviving spouse's estate.  Therefore the unused exemption is not lost forever, but is preserved.  In order to take advantage of this election, a federal estate tax return must be filed, even though an estate tax return would not otherwise be required by an estate of less than $5M.  Read more>>
PasswordsPLANNING FOR YOUR DIGITAL LIFE: Download our printable password record

Managing your digital assets is becoming increasingly important in careful estate planning.  Here you can download a printable record of usernames, passwords, and other information about your online accounts. 


AboutAbout Pierson & Strachan

Pierson & Strachan P.C. is a law firm serving clients throughout Lake and Cook Counties specializing in estate planning and probate, real estate and land use, business law, and other contract matters. From issues that affect your family to those that impact your business, our attorneys combine cutting-edge technology with personal service to vigorously represent your interests and get you the results you need. Read more>>


Our Approach to Billing 

At Pierson & Strachan, we believe that open communication with our clients is imperative to establishing trust and working together effectively.  We know that engaging an attorney is a leap of faith. This is particularly true when it comes to billing and costs.  Our approach to billing eliminates the potential for "sticker shock" that erodes trust.  Read more>>

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This information may address some questions, but is not intended to be a comprehensive analysis of the topic or legal advice.  Independent tax and legal advice is recommended.