The Future of Estate Planning

The fiscal cliff legislation passed in early January has had an impact on many aspects of finance, including estate planning. A recent article discusses how estate planning is changing as a result of the legislation.


The legislation fixed new tax rates and exemption limits. The federal exemption amount now sits at $5.25 million, and the federal estate tax is now 40 percent. For married couples, the combined federal exemption amount is $10.5 million. Moreover, the portability provision makes it possible for a spouse to utilize any unused portion of their deceased spouse’s federal exemption amount.

If you are a taxpayer with a net worth beyond $5.35 million, you may wish to transfer assets in order to avoid federal estate tax. Although gifts made during life will have tax consequences, these consequences are often more favorable than those for after-death transfers.

There are certain tactics that people are beginning to try in order to reduce their taxable estate based on the fact that the federal estate tax exemption will not change. Gifts to charitable trusts are again becoming popular, as those who gift assets to qualified charities receive immediate deductions. Those who are worried about high federal estate taxes may also wish to fund a trust with a life insurance policy. This is a good way to immediately receive a large amount of cash when a person passes away, and this money can immediately be put towards estate taxes.

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