Estate planning is not necessarily a conversation people are excited to jump into. Thinking about finances, providing for one’s family, and of course death can be discomforting and stressing for some. One good piece of news, however, is that the present environment is very favorable for estate planning, particularly for elderly individuals who may die in the next year.
With the current estate tax exemption amount at $5 million for individuals and $10 million for couples, some will be able to avoid federal estate tax altogether. The exemption amount is set to revert back to $1 million in 2013, though it isn’t clear whether Congress will take action or not.
Low real estate values and securities values, and low interest rates are also part of the current estate planning climate, and are making it more inviting for individuals and couples to give away assets and make loans to children or trusts set up for their benefit.
Married couples currently enjoy portability of the estate tax exemption, which means that any unused portion can be carried over after the death of a spouse. Keep in mind, though, that an estate tax return must be filed for the deceased spouse within nine months of their death in order to take advantage of portability, regardless of whether any taxes are owed.
Gifting is still a very good option for couples who find it fits well with their estate plan. Individuals may give up to $5 million in gifts during their life or at death without paying any taxes. And individuals still enjoy the $13,000 annual gift tax exemption.
When it comes to trusts, there are many options that are enhanced by the present estate planning climate. Low interest rates and low real estate values have bumped up the popularity of grantor-retained annuity trusts, generation-skipping trusts, charitable remainder annuity trusts, and qualified personal residence trusts.
With thing looking so favorable at present, it might not be a bad idea to review your estate plan or begin the process.
Source: Investment News, “A “perfect storm’ for estate planning,” Andrew Osterland, November 6, 2011.