If you want to be comprehensively prepared for the future you have to recognize the fact that revisions to your existing estate plan will probably be necessary over the years. Many people undergo significant life-changing events such as changes in marital status, or the loss of a loved one or someone you named as executor or trustee. These are some of the most common things that occur that require an estate plan update. But there are also things that take place outside of your immediate control. It’s important to be aware of these as well.
For example, changes in the tax code can have an impact on your existing estate plan. We are faced with just such a change in the very near future. At the present time the estate tax exclusion is $5 million and the maximum rate is 35%. This arrangement is in place due to provisions contained within the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 that was passed last December.
This tax relief act is going to sunset at the end of 2012 and under current law the estate tax exclusion will be reduced to $1 million. Even worse the top estate tax rate will increase to 55%. That is quite a difference and it makes 2012 a very interesting year from a tax perspective.
Because the gift tax exclusion will be $5 million (plus an upward adjustment to allow for inflation) in 2012, and just $1 million in 2013, you may want to consider making gifts in 2012. Though this may seem like a no-brainer on the surface, it is a delicate matter. In a perfect world you may want to take advantage of the ability to transfer significant wealth but you may not want to part with ownership of significant resources at this time. And, it is always possible that the laws as they stand right now could be changed.
Gift giving in 2012 before the gift tax exemption is reduced is certainly something to consider. The best way to proceed in this regard is to discuss the matter with a licensed and experienced estate planning attorney.
Larry Parman
Author, President and Founding Attorney
Parman & Easterday
Since founding Parman & Easterday in 1985, Larry has led over 1,000 free, community-service education programs and helped more than 10,000 Oklahoma families go from putting off their estate plan to getting it done. His goal for every client is the same: to become the person their family calls "the one who took care of everything."
Larry is the author of three books: The Straight Shooter's Guide to Estate Planning; Estate Planning Basics; and Guiding Those Left Behind in Oklahoma. He served as Oklahoma's Secretary of State and Secretary of Commerce, and his firm is the only member of the American Academy of Estate Planning Attorneys in the state.
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