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.