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Tax Alert: Estate Planning Update

For those of you that are considering estate planning, June interest rates have dropped so GRAT’s and sales to grantor trust are more favorable for June than May. The bad news is that another month has past and many individuals still have not taken advantage of the current favorable exemptions and tax rate. Today, everyone has a lifetime credit amount of $5,120,000 ($10,240,000 if married) and the 2012 federal estate and gift tax rates are 35% (NJ and NY current have no gift tax). If Congress does nothing the 2013 federal rates go to a high of 55% and the lifetime credit amount goes down to $1,000,000 ($2,000,000 if married). President Obama has indicated he would like to see 2013 rates raised to 45% and reduce the lifetime credit to $3,500,000. Additionally, President Obama wants to restrict the use of GRATs, eliminate many valuation discounts and has for the first time ever introduced the concept of estate inclusion for grantor trust. Currently, the exclusion of assets held in grantors trust from the grantors estate is one of the most important concepts on estate planning today. Individuals who wait until late 2012 to begin their planning may find themselves without sufficient time to plan, obtain appropriate valuations and find qualified attorneys who are not already overwhelmed by their existing year end workloads to handle new request. Given this set of circumstances, every individual should be aware of this unique planning opportunity before it passes.

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