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Estate Planning Update
May 2012
Greetings!

The March 2011 issue of this newsletter quoted an article that appeared in the Wall Street Journal on January 29, 2011:

"Over the past 26 months four sets of estate-tax rules have been in effect, with the individual exemption bouncing from $2 million (2008) to $3.5 million (2009) to unlimited (2010) to $5 million (2011).

   

Most worrisome are what is known as 'formula clauses.' These are provisions tying bequests to the amount of the estate-tax exemption..."

 

Unfortunately, the laws governing the gift tax, estate tax, and generation skipping transfer tax continue to present a moving target. This year's wealth transfer tax laws reflect a modest revision of last year's laws. And they will change yet again in 2013. However, the new package of laws that take effect in a few months will dramatically increase both the number of taxpayers who are required to pay estate tax and the rate at which they are taxed.

 

On January 1, 2013, the gift tax and estate tax exemption amounts will drop from $5.12M to only $1M. And the tax rate on the excess over $1M will jump from 35% to 55%. (While it's possible that Congress will consider revising these laws once again, it probably won't even begin to debate this issue until Summer 2013. And, based on Congress' recent dysfunction, reaching an agreement will prove very difficult.)

 

Consider an estate that is currently worth $2M. If the owner dies this year, the entire estate could be transferred tax-free. However, if the owner dies in 2013 or later, this estate would be subject to a minimum tax of $550K, unless the decedent had implemented a well-designed plan based on current law to reduce or eliminate their estate tax. 

 

In every year since 2008, we have had to wrestle with different wealth transfer tax laws. When these laws change again in a few months - in very significant ways - will your current estate plan still work? 

 

Please contact me at 323.654.9513 or brookspaley@paleylaw.com if you would like to discuss any aspect of your current estate plan.

 

Brooks Paley, J.D., LL.M.

Attorney at Law 

 

About Paley Law Corporation
Brooks_03.12
Paley Law Corporation is based in Los Angeles and specializes in providing personalized, sophisticated estate planning and related legal services. Brooks Paley, J.D., LL.M., is the managing principal of Paley Law.  Brooks has been a member in good standing of the State Bar of California since he was admitted in 1993. He is a member of the Trust and Estates Sections of the State Bar of California, the Los Angeles County Bar Association, and the Beverly Hills Bar Association. Brooks earned his Master of Laws in Taxation with High Distinction at Loyola Law School Los Angeles, his Juris Doctor at the USC Gould School of Law, and his Bachelors Degree at Stanford University.

The above material is provided for general informational purposes only and is not intended to constitute legal advice in any particular matter. Transmission of this material does not create an attorney-client relationship. Paley Law Corporation does not warrant the content of this material and is not responsible for any errors or omissions associated with it.

To ensure compliance with requirements imposed by the Internal Revenue Service, Paley Law Corporation informs you that any U.S. tax advice contained in this communication (including any links to other websites or material) is not intended to be used, and cannot be used, for purposes of (i) avoiding penalties imposed under the Internal Revenue Code, or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.

    

3301 Barham Boulevard, Suite 402A, Los Angeles, California 90068 

323.654.9513 Tel 323.417.4730 Fax

 

2012 Paley Law Corporation