With nearly 10,000 Baby Boomers reaching the age of 65 on a daily basis for the next two decades, there is no time like the present to develop, or to revisit, your estate plan (1). Never before has there been the opportunity to effectively plan for such a large transition of wealth.
Estate planning is more than thinking about one’s assets and who receives them upon one’s death. It really is more about deciding how one wishes to live their life, prepare for the unexpected in the event of a disabling event, and how one wishes to care for their family and favorite charities.
Estate planning is in reality a process that needs to be regularly reviewed due to changing life situations, such as divorces within the family, the births or adoptions of new children, new grandchildren and the retirement planning that many of us face.
What We Do Know
We do know that at the end of this year, there exists the possibility that the federal estate laws may significantly change; or they may not. We know that the President’s Budget proposes to reduce the estate tax exemption from its current $5 million per person, back to the 2009 level of $3.5 million. However, some members of Congress are pushing for a return to the prior $1 million amount.
Regarding “gifts” we know that an individual can gift up to $5 million (reduced by prior gifts), whereas, a married couple can make aggregate gifts up to a lifetime exclusion of $10 million (reduced by prior gifts). Because the current legislation is indexed for inflation, these amounts for 2012 have been increased to $5.12 million for individuals and $10.24 million for a married couple. In addition there remains the $13,000 per person, per year, gift that is free from federal gift tax, which may be given to an individual or to others for the benefit of an individual such as a qualifying educational institution or a medical care provider. The current gift tax for gifts exceeding these levels is now 35%. The current proposal is for that rate to revert back to 55% in 2013, absent action from Congress. So, gifting strategies may provide a good opportunity for you now.
We know that, as far as state laws are concerned, Massachusetts just adopted the Uniform Probate Code, and has changed many of it probate procedures and laws. Therefore estate plans that involve assets in Massachusetts should be reviewed and updated.
In Maine, the 2011 legislature approved two major overhauls regarding Maine estate taxes. One is that the current estate tax exemption of $1 million per person, will change to $2 million on January 1, 2013. Therefore, estate plans that use trusts that ensure to maximize the Maine state estate tax exemption under the soon to be “old” rate, should be reviewed to take advantage of the new higher rate. Second, the Maine estate tax rates will be changing for individuals who pass after December 31, 2012. Currently there are thirteen (13) different rates (depending upon the size of the estate). As of January 1, 2013, there will only exist three (3) tax brackets, that will range from a low of 8% to a high of 12%.
We have highlighted some of the more important and significant changes that may affect your estate planning ideas, and current estate plans. A complete review of existing plans, and the development of new plans for those who do not yet have them, is of great importance. We understand that we all tend to put off certain things, even though we know they deserve and need our immediate attention.
A wise person once said : “…a failure to plan is a plan for failure”.
The typical one-size-fits-all approach to estate planning is in our view, never appropriate. Our estate planning group takes great pride in listening carefully to our clients, understanding their desires and needs, and then we custom tailor plans to fit those needs.
Therefore, we are delighted to talk with you about your desires, wishes and plans to protect yourself and your assets, and to help you develop or update your estate plans. Please feel free to call us at any time to arrange for a meeting to help you arrive at the piece of mind that you want…and deserve.
(1) Wall Street Journal, Sept.5, 2012 (Dow Jones & Co., Inc.)
Gail Kingsley Wolfahrt, Esq.
(admitted in MA and ME)
Brian L. Champion, Esq.
(admitted in MA, NH, ME, and D.C.)
IRS Circular 230 Disclaimer: Any tax advice in this communication is not intended or written by the firm to be used, and cannot be used, by a client or any other person or entity for the purpose of (i) avoiding penalties that may be imposed on ant taxpayer, or (ii) promoting, marketing or recommending to another party any matters addressed herein.
The tax laws discussed stated apply only to U.S. citizens who are residents of the United States. These views are not to be considered legal advice and are presented without warranty of their accuracy, completeness or timeliness. Receipt of this material does not create an attorney / client relationship. These materials may constitute attorney advertising under the laws, rules or regulations of various jurisdictions.