Five Months Left to Take Advantage of the 2012 Estate Planning Window of Opportunity

The 2010 Tax Act set the federal estate tax exemption, the gift tax exemption and the generation skipping tax exemption to $5 million adjusted for inflation with an estate tax rate of 35%. The inflation adjusted amount of the exemption in 2012 is $5,120,000. On January 1, 2013, without further action from Congress, this exemption amount drops back to $1 million (adjusted for inflation) and the estate tax rate goes up to 45% to 55%. Thus, 2012 provides a unique window of opportunity to make family wealth transfers and save significant amounts of estate tax.

In addition to the reduction in the exemptions other popular and tax efficient estate planning strategies such as valuation adjustments and grantor retained annuity trusts may be curtailed or eliminated all together.

If your estate exceeds $1 million you should consider estate planning to minimize estate taxes at both the federal and state level. There are many vehicles available that may help you accomplish your goals including:

  • Dynasty Trusts to preserve assets for future generations
  • Qualified Personal Residence Trusts
  • Grantor Retained Annuity Trusts
  • Life Insurance Trusts
  • Lifetime Marital Trusts
  • Charitable Trusts
  • Sales and loans to trusts

If there is concern of retaining sufficient cash flow or assets for the remainder of your lifetime you should still consider discussing available estate planning options. Some strategies may provide the cash flow you need while also saving estate taxes.

This year may be the only opportunity to move significant wealth from your estate. It is imperative to review your estate planning to take advantage of this opportunity now. The estate planning process may take some time to put in place and requires a team of advisors. Waiting until year end to plan may make it impossible to implement an appropriate strategy by December 31, 2012. Please contact your Katz Abosch client executive or our Estate Administration Department to discuss this opportunity.

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