- Tax exemption is higher now than ever, but not for long.
The current estate, gift and generation skipping tax exemption is currently $5,120,000 ($10,240,000) per couple. This is higher than it has ever been and is scheduled to drop to only $1,000,000 (only $2,000,000 per couple) in 2013 unless Congress and the President can reach an agreement. This may be a use it or lose it!
- Your plan may disinherit your spouse!
Do your current estate planning documents include a formula for determining the amounts passing to heirs or trusts for heirs based upon the exemption? With the currently high exemptions, your plan may disinherit your spouse!
- Is your business safe from creditors or predators?
Do you have a succession plan for your business? Does your plan include the use of asset protection trusts funded up to the amount of your exemption to safeguard your business from your heirs’ creditors, spouses and predators?
- Interest rates are historically low!
The interest rate that the IRS requires to be used for interfamily loans, sales to family trusts, and other planning techniques is at historical lows. The current required interest rate for a 9 year loan made in June 2012 is only 1.07%.
- Discounting the value of assets is still available.
Discounted values for lack of control and lack of marketability for interests in Corporations, Partnerships and LLCs are still available for interfamily transactions. There has been much talk about limiting such discounts, but currently, discounting is still available for planning purposes. When discounting the value of assets by 33%, the effective interest rate on a note as mentioned in item four above drops to only 0.7%!
- If you’re feeling generous – there’s no estate or gift tax!
If you are currently giving or planning to give significant sums of money or assets to your favorite charity, the current low interest rates allow you to help your charity and transfer assets to your heirs with no estate or gift tax. Ask about the use of a charitable lead trust.
- Consider a Roth IRA conversion for estate tax savings.
If you have a large IRA or retirement plan as part of your taxable estate, which is in excess of the exemption, you should consider a Roth IRA conversion. This will reduce your taxable estate and provide years of tax free cash flow to heirs.
- Avoid aggressive taxation on your vacation home.
Do you have a vacation home outside Florida that will be subject to state estate tax and the costs of an ancillary probate administration in that state? Simple steps can avoid the often very aggressive taxation of these homes.
- Is your life insurance subject to estate taxes?
An irrevocable life insurance trust can avoid the estate tax and provide asset protection for your heirs.
- Do you have a family member who has special health needs?
You may want to consider unique provisions in your estate planning documents.
Don’t wait until the end of the year to get started. Do it now!
John R. Anzivino, CPA is in charge of Kaufman, Rossin’s estate, trust and exempt organization practice. Kaufman, Rossin & Co. is one of the top CPA firms in the state and offers a wide variety of services for high-net worth individuals. John can be reached at email@example.com