As we near the end of 2012 and think about our estate plans, the main question that arises is "What will happen to the Estate Tax Exemption in 2013?" If only I had a crystal ball I could tell you the answer to the $1,000,000 question. However, since I do not, here is some information to help you plan properly.
In 2013 the Estate Tax Exemption will decrease from $5,000,000 to $1,000,000 per person. There is a chance congress will vote to change the exemption amount, but for now this is the plan. Yes life insurance, in most cases, is included in your estate. For many of you reading this newsletter.... Congratulations! In nine weeks you will have a taxable estate. Depending upon your individual circumstances there are ways to lessen the potential tax issue (55% tax), some of which are listed below:
1. Wills including Credit Shelter Trusts. This process should also include asset splitting between spouses, thereby taking advantage of each person's maximum exemption.
2. Life Insurance Trust. This is to hold life insurance policies outside of an individual's estate.
3. Gifting during 2012. The lifetime gift tax exclusion in 2012 is $5,120,000 . Gifting reduces your estate and this exclusion is substantially lowered next year.
4. Gifting to a Charity. Gifts to charity are not included in your taxable estate. Charitable gifts during life reduce your estate and can qualify for other tax savings.
This information is simply an overview of the issue. Every person's estate plan is unique and should be drafted to suit the individual needs and requirements of the client, If you have questions about your current plan or about the impending changes, do not hesitate to call me to discuss. As an attorney, I don't try and alarm; I provide you with basic information in these newsletters, so that you may make an educated decision that is best for you.