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Why You Still Need a Credit Shelter Trust

Author: Keith Huggett

Even though portability now allows married couples to use up both spouses’ estate tax exemptions without having to make lifetime asset transfers or set up trusts, this “easier” path isn’t necessarily the better path. For couples with large estates, making lifetime asset transfers and setting up trusts can provide benefits that exemption portability doesn’t offer.

With portability, if one spouse dies and part (or all) of his or her estate tax exemption is unused at death, the estate can elect to permit the surviving spouse to use the deceased spouse’s remaining estate tax exemption. But making the portability election doesn’t protect future growth on assets from estate tax like applying the exemption to a credit shelter trust does.

Also, the portability provision doesn’t apply to the GST tax exemption, and some states don’t recognize exemption portability. Credit shelter trusts offer GST and state estate tax planning opportunities, as well as creditor and remarriage protection.

If you’d like to learn more about credit shelter trusts or other estate planning strategies for your situation, please contact us.

Preparation Is The Key

Author: Keith Huggett

While the newspapers are awash with discussion of the fiscal cliff and the looming tax increases that could potentially occur on Jan. 1, 2013, there are even potentially larger issues coming with the estate tax. Barring congressional action, the top rate will return to 55 percent and the maximum exemption will drop down to $1,000,000. Regardless of what happens, good estate planning strategy is key. Here are five tips to help you plan your estate and minimize your taxes:

1. Marry your companion if you have not already done so. Transfers between spouses are usually tax-free. This can also protect your spouse's right to your assets.
2. Write a will. While a will won't necessarily shelter you from taxes, it will help to ensure that your assets go to the correct heirs. Working with an estate planning expert to set up trusts can be an even better way to ensure that your money goes where you want as well as to potentially avoid some taxes.
3. Take full advantage of your tax-free gift provision. Right now, you can give $11,000 per year tax-free. Gifting funds while you are alive takes money out of your estate and reduces the amount that might be subject to estate tax.
4. If you own a business that you will be leaving to your heirs, consider letting them buy stock in the business before you pass away. You may even be able to lend them the money that they use to buy the stock.
5. Plan for the basis set-up. When your assets transfer to your heirs, their basis gets stepped up to the fair market value based on the time that you pass away without your heirs having to pay capital gains taxes. With this in mind, consider holding onto your most highly appreciated assets to leave to your heirs while selling assets that are less appreciated when you need cash for your lifestyle.

Estate planning is extremely complicated, especially with the tax code in flux. The tax experts at The Tax Office, Inc. keep tabs on the evolving tax code and can share the best estate planning strategies with you.

Plannning For The Future is Wise For Everyone

Author: Keith Huggett

Estate tax planning is not just for the wealthy. If you have enjoyed some financial success, it's wise to think about the future and how you want your savings to be allocated. While this can be a difficult decision in itself, it has only been made more complicated by recent changes to the tax laws. For 2013, taxable estates worth more than $1 million will be subject to the federal estate tax. This is a major change in contrast to previous years when the threshold was closer to $5 million.

What does this mean for estate tax planning? If your household assets exceed the minimum threshold, your estate may be subject to a higher tax. However, if you work with a qualified financial adviser and plan wisely, you may be able to avoid this. Many families choose to dissipate or transfer their wealth to avoid the estate tax. Some of the ways to do this include:

• Gifting cash to relatives
• Paying for your children's medical or educational expenses
• Marital deductions
• Division of assets in a marriage
• Excluding life insurance assets from the estate
• Smart retirement saving strategies
• Charitable trusts

Extremely wealthy individuals have even more wealth transfer methods at their disposal, such as various types of trusts, but these tools tend not to work for moderately successful families who need more cash at their fingertips. It may also be unappealing to tie up your wealth for an extended period of time only to have the estate tax laws possibly change again in your favor.

It is still possible that the new estate tax law will be repealed or modified, but in any case, working with a professional financial planner can help you maximize your savings both now and in the future.

If you need help with estate tax planning or any other financial issues, call The Tax Office, Inc. today to learn more about our personal and business tax services. Tax planning is something you should be doing on an ongoing basis, not just at the end of the year. Schedule an appointment today to get started.