Estate Planning: The Clock is Ticking -- Use it or Lose it Before 2013

"Estate Planning: The Clock is Ticking — Use it or Lose it Before 2013" by David Pratt, Lindsay A. Roshkind, and Scott L. Goldberger - Florida Bar Journal (February 2012 -- Volume 86, No. 2) ("Page 31 | On December 17, 2010, President Obama signed into law the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, Pub. L. No. 111-312, 124 Stat. 3296 (2010) (2010 act). The 2010 act ushered in some significant changes to the estate, gift, and generation-skipping transfer (GST) tax regimes, namely reducing the estate, gift, and GST tax rates to 35 percent, increasing the estate, gift, and GST tax exemptions to $5 million,[1] and reunifying the estate and gift tax exemptions.[2] However, these provisions of the 2010 act will remain in effect only through December 31, 2012, when the act is scheduled to sunset.[3] Unless Congress enacts new legislation prior to then, on January 1, 2013, the law will revert to the laws in effect in 2001, with top estate, gift, and GST tax rates of 55 percent, estate and gift tax exemptions of only $1 million, and a GST tax exemption of only $1 million (indexed for inflation).[4] Thus, in order for clients to avail themselves of the maximum benefits under the 2010 act, clients should consider engaging in one or more of the planning techniques discussed in this article as soon as possible. Each of these techniques can significantly reduce one’s taxable estate at death by taking advantage of the provisions of the 2010 act before they expire.")

The Rush to Avoid Gift Taxes

Family Value: The Rush to Avoid Gift Taxes - WSJ.com (JEH: This is an excellent, brief article on several key trust planning concepts related to the potential use of the current $5 million estate/gift/generation-skipping transfer (GST) tax exemption. I have posted other articles on this topic over the past year or so. Many practitioners and commentators have suggested self-settled spendthrift trusts (also known as "domestic asset protection trusts" (DAPTs)), which this article highlights, as part of this type of planning. These trusts are generally not advisable for effective protective planning, but can indeed be useful in the context of making a completed gift for federal transfer tax purposes in this current exemption scenario because they offer added flexibility (though, again, likely little if any actual protection for the grantor(s) (also known as the settlors or makers of the trust)). If you are considering this type of planning, you should commence sooner rather than later. If you wait until November or December 2012, you will probably be too late.)

president obama budget proposal estate planning

Change is on the Way: President Obama’s proposals for estate planning in 2013 and beyond - WEALTH WATCH - Trusts & Estates Magazine (JEH: The current administration's proposals make planning during 2011 and 2012 even more important. The current $5 million gift tax exemption, which is the highest in history (except during times when these federal transfer taxes did not exist), would be decreased to the $1 million exemption under the 2001 tax act. The estate and generation-skipping transfer (GST) tax exemption, which are also currently $5 million, would return to their $3.5 million levels under the 2001 tax act. In addition, the proposals suggest a 90 year "term limit" on trusts designed to optimize these exemptions (essentially a tax-oriented version of the rule against perpetuities) in order to limit their effectiveness (which of course means taxing those assets more often as they pass from one generation to the next). Consequently, planning to utilize the current exemption is critical for anyone whose assets would exceed the revised exemptions, including those whose assets would appreciate beyond those limits. With the possibility of future inflation, that might be more folks than anyone thinks now.)