We Care

How should I approach estate planning after the fiscal cliff deal? P.2

In our last post, we began looking at some of the ways the recent fiscal cliff deal has changed the face of estate planning. In this second part, we’d like to offer some suggestions for specific strategies folks might wants to consider when engaging in estate planning this year.

The first thing to look into is gifts to charity. Because of the increased taxes, gifts to charity have a greater tax-deductible value. Gifts to foundations, in particular, allow full deduction in the year the gift is made, whereas transfers out of foundations can be as small as 5 percent on an annual basis, so that assets in the foundation can continue to grow.

Charitable trusts are another tool to consider. Such trusts allow one to make gifts to charity and receive immediate deductions. One is able to continue receiving income from the charitable gift for an amount of time, and gifts can also be made where the charity receives a distribution each year while family receives the remainder.

Life insurance trusts are another useful to consider in 2013. Funding a trust with a life insurance policy is one way to ensure that estate taxes are paid off when someone passes away, thus preserving the estate itself from and liability. Doing so also allows one to avoid estate taxes by getting a large asset out of one’s estate. In doing so, the trust should be named as the beneficiary and policy owners.

The changes brought about by the fiscal cliff deal were big, and there may be even more coming as Congress begins to deals with the debt ceiling. We’ll keep our readers updated of any changes.

Source: Life Health Pro, “The road ahead for estate planning,” John Mcmanus, February 22, 2013