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Home » Estate Planning Articles » Tax Alert! Special Gifting Opportunities Expire December 31, 2012

Tax Alert! Special Gifting Opportunities Expire December 31, 2012

October 31, 2012

Compliments of Our Law Firm,
By: The American Academy of Estate Planning Attorneys

If you think only the super-rich need to worry about estate and gift taxes, you may want to think again. As of January 1, 2013, individuals with estates larger than $1 million might once again be subject to these federal taxes.

A Little Background

In December 2010, Congress passed a set of laws known as TRA 2010. These laws extended the Bush tax cuts until midnight on December 31, 2012.

Under TRA 2010, individuals with estates under $5.12 million are not subject to federal gift or estate tax. However, if Congress allows TRA 2010 to expire, estates larger than $1 million will become taxable at the beginning of 2013.

What Can You Do?

One option is to gift a portion of your estate. Between now and December 31 2012, an individual can gift up to $5.12 million (and a couple can gift up to $10.24 million) completely gift-tax free. This strategy is straightforward and works well if you are comfortable giving away a significant portion of your assets during your lifetime. But what if you don’t want to give away millions just to reduce your tax bill?

Another way to preserve your estate is to lock in the current estate tax exclusion using a well-planned trust. Here’s an overview of how this strategy works:

  • You put your money into a trust for your spouse or partner, removing them from your estate.
  • Your spouse or partner can act as trustee, making distributions to him- or herself, subject to certain restrictions.
  • The trust assets are available for your spouse or partner to use and enjoy, but they are not included as part of his or her estate.
  • You have the option to name your children or others as trust beneficiaries, as well.

If you are married, or if you are in a long-term relationship, you and your spouse or partner can even set up trusts for each other. Certain rules must be followed so that your trusts avoid the “reciprocal trust doctrine” and your estate planning attorney can explain how this is done. Using this strategy, you could shelter a total of $10.24 million from estate taxes.

Timing is Everything

The clock is ticking. No one knows what Congress will do between now and the end of this year. One thing is certain: you have until December 31 to complete the planning and gifting necessary to benefit from what the law currently allows. It can take several weeks for an experienced estate planning attorney to complete the work involved in establishing a trust and transferring all the necessary assets, so do not delay talking to your attorney to choose a course of action.

 

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We need to update our Living Trust and attended Schomer Law Group’s seminar. Afterwards we made an appointment and were impressed by the attention Scott Schomer and Liran Aliav gave to our case answering all questions and making suggestions how to minimize the estate tax. All the office staff is very friendly and we highly recommend Schomer Law Group.

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Mr. Schomer does an amazing job at explaining all the intricacies of establishing a trust. He and his team help you every step of the way so you always know what to expect and what you are preparing for. Best education you can get and the best gift you can give your family.

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We put off getting a trust for years. After attending a seminar with Scott Schomer we realized that the time had come to get a trust. We were given very good reasons for why we should get a trust. No pressure, just the plain facts. We are very relieved and happy to finally get our trust. Scott and Cesar were very knowledgeable, helpful and listened to our ideas of what we had to say. Any questions that we have now and in the future they are available to assist us to solve them. I recommend the Schomer Law Group and I wish we knew about them years ago.

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When you’re presented with an invitation to attend in a mailer, you may have reservations, this was a truly gift!! My wife and I were educated and guided through the process of creating a family trust.
Both of our parents had attorney’s that “worked” with wills/trusts, but came up short. Fortunately, the Schomer Law Group was there! This is a group of attorney’s that only specialize in estate planning, law, and financial advice, so you know you’re getting expert and personalized advice. This is the best money we’ve ever spent!! Thank you!

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We knew we had to update our 10 year old ( 20 page ) trust. After several detailed meetings, Liran and Cesar produced a large ( 300 pages + ) highly detailed trust document that we have used to make sure our family estate is well managed and clearly understood.
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We would strongly recommend the Schomer Law Group to anyone with an estate of even modest means, to assure proper planning…

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