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Estate Planning

Generally, the goals of estate planning are to provide for financial security in life and to maximize - given the client's goals and objectives - the estate for family and other heirs following death. To fully leverage estate preservation opportunities and develop strategies to help achieve distribution objectives, we consider:

  • Will and trust design strategies
  • Property ownership alternatives, including the review of titling and beneficiaries to coordinate with your overall plan
  • Estate tax education techniques
  • Insurance analysis
  • Qualified plan distribution alternatives
  • Family-gifting strategies
  • Charitable planning
  • Employee stock option optimization

Tax Considerations

After several "false" starts and much debate, legislation to repeal the federal estate tax continues to be offered by members of Congress.

Portability of Exemption Equivalent

The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (the Act) allows portability of a decedent's unused estate exemption to the decedent's surviving spouse. Currently, portability is applicable during 2011 and 2012.

In addition, portability applies to the unused exemption of the surviving spouse's most recent deceased spouse. Thus, beginning after 2010, a surviving spouse could use his/her exemption (assume $5,000,000) plus the unused exemption of his/her most recent deceased spouse, for a possible total of $10,000,000.

Reunification of the Estate and Gift Tax Regimes

For 2011 and 2012, the estate and gift tax exemption and tax rates will be the same. Thus, for 2011 the estate and gift tax exemptions will be $5 million; and the estate and gift tax rate will be 35% for 2011 and 2012.

Currently, the basis of inherited property is generally "stepped up" to its fair market value as of the decedent's death. Thus, if you inherit property and later sell it, you do not have to pay income tax on any appreciation that occurred before you inherited the property. Some property - tax-deferred money in retirement plans and individual retirement accounts, for example - will not be eligible for the step-up. This property will pass to heirs and beneficiaries with a "carryover" basis equal to the lesser of (1) the decedent's adjusted basis in the property or (2) the property's fair market value on the date of death.

For example, let's say your father dies in 2011 and you inherit closely held stock from him that he bought for $5 a share. The stock is worth $500 a share upon his death. Under the step-up in basis rules, if you sell the stock, there would be no capital gains tax because of the basis step-up for property included in an estate.

Other Provisions

The Act includes other provisions - positive and negative - that you may need to factor in to your estate planning. For instance:

  • It applies to calendar years 2011 and 2012.
  • Gifts made prior to 2011 are not impacted by the Act.
  • It allows a deduction of estate taxes paid to any state or the District of Columbia for decedents dying after 2009.
  • The generation-skipping exemption and tax rate are $5 million and 35%, respectively in 2011.

Without a properly structured estate plan taxes can claim up to half of your estate. Proper planning is a necessity, as it can assure that you minimize estate settlement costs and maximize the size of the estate you preserve for your family. We provide advice on issues such as property ownership, distribution strategies, and estate tax reduction techniques. We also identify and analyze potential liquidity & equalization issues. We know how to effectively utilize trust arrangements, family partnerships, private annuities, various gifting strategies, charitable planning techniques, and many other advanced strategies to help our clients maximize the value of their estate.