Monthly Archives: January 2013

The “New Normal” of Estate Planning

What has changed? Surprisingly little. And that has changed everything.

Now that Congress has made permanent the $5 million federal individual exemption (adjusted for inflation) for estate taxes and other provisions that take estate tax planning out of the picture for the vast majority of Americans, estate planning will look very different. Very. In fact, most of the esoteric planning that engineered tax breaks for the wealthy will still be employed, but the bar for who is “wealthy enough” to need estate tax planning has just been raised significantly.

At the end of December 2012, it was widely assumed that the $5 million individual exemption could drop to $1 million, or at least $3.5 million. Alternatively, there could be another “stop gap” extension and a need to vote again, leaving us with continued uncertainty in the estate tax arena. Yet instead, Congress surprised everyone and enacted permanent provisions that are more generous than anyone anticipated.

As a brief summary, here’s where we are on the federal estate tax front:

1) The $5 million per person exemption was extended, which will continue to be indexed for inflation.

2) The top rate increased to 40%, effective 1/1/13.

3) Portability remains in place (a post-mortem election you can take to preserve the first spouse’s exemption).

4) The $5 million gift tax exemption remains in place.

You can also check out my YouTube video from January 2 for the same summary:

Now that you know this, for the foreseeable future, many of you can simply tune out federal estate tax planning altogether. Wow. How often do lawyers say that? Tune it out? Almost never, I can assure you. But in this case, you probably can do just that. Big caveat: If you do have an estate approaching the thresholds or expect an inheritance or other infusion of cash that may put you there – lucky you! – of course, perk your ears back up and take notice.

If you would like further commentary about the new estate tax laws and their effect, take a look at luminary estate planner Martin Shenkman’s article from Financial Planning entitled: Tax Deal a Game Changer for Estate Planning.

Anne Marie Segal is admitted to practice law in Connecticut and New York and provides estate planning and other legal counsel to businesses and individuals. This information is provided for your convenience and does not give legal advice for your situation. You should consult an attorney for advice if you have questions about what type of estate plan is right for you. State estate taxes, divorce/remarriage concerns (present or future) and other factors may also affect your decisions about estate planning.

 None of the interactions on this site form an attorney-client relationship. This is a public forum. Please do not post confidential or fact-specific information regarding your legal questions on this site.

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Happy New Year: Five Essential Legal Documents for 2013

Happy New Year!

If you don’t have them already, and unfortunately many of us don’t, here are five essential legal documents to prepare you for 2013 and beyond. Do your family a favor and get these in place before they are ever needed.

1) Will. A “Last Will and Testament” is the central estate planning document that allows you to direct how your assets will be distributed upon your death and who will serve as your executor. If you have minor children, you can also designate guardians in a will. If you die without a will, the laws of your state determine how all of your property – from stocks to shoes – will be distributed. This may or may not accord with your intentions.

2) Advance Directives. A “living will” and a “health care proxy” are the two essential elements of an advance directive. The first gives your wishes for medical care in case of, for example, emergency and terminal illness. The second appoints an agent to make medical decisions if you are unable to do so. In some circumstances, a DNR is also appropriate.

3) Durable Power of Attorney. You will want to appoint someone you trust implicitly to be in charge of your finances in the event you are not able to do so (such as a prolonged recovery from an accident that leaves you mentally impaired). If not, valuable time will be wasted while your agent attempts access your assets, which may be needed for your or your family’s care. Depending on your personal circumstances, you may determine that a “springing” attorney is more appropriate, which is valid only if it is demonstrated that you are incapacitated.

4) Records of Passwords. Since bank statements and other important elements of our lives are often dependent on online passwords, you should have a secure system or file so that your personal representative can access these records if needed. The last thing you want is for assets to be left unclaimed (and escheated to the state) because no one knows where your accounts were held.

5) Temporary Guardianship Paperwork. If you have minor children, in addition to appointing a long-term guardian in your will, you want to have temporary guardians available to step in for emergencies and other situations where you may not be able to serve as guardian for your children, or upon your death in the first hours and days while the long-term guardian arrangements are put into place.

Just as you are jumping on the treadmill or passing up that second piece of chocolate cake to stay healthy for years to come, also take some time to prepare your estate plan. If you would like to watch my video 6 for 5: Six Minutes for Five Essential Legal Documents for 2013, see below.

Anne Marie Segal is admitted to practice law in Connecticut and New York and provides estate planning and other legal counsel to businesses and individuals. This information is provided for your convenience and does not comprise a complete estate plan or give legal advice for your situation. Other documents, such as a living trust, may be appropriate for your circumstances, depending on your state’s probate procedures, your asset base and other factors.

 None of the interactions on this site form an attorney-client relationship. This is a public forum. Please do not post confidential or fact-specific information regarding your legal questions on this site.

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