2012 Year-End Estate Planning Advisory


Now that the election is over, we anticipate having some guidance soon with respect to the numerous tax and planning issues that have been mired in uncertainty for the past two years. Many tax benefits are scheduled to “sunset” as of December 31, 2012. These benefits include the $5.12 million estate and gift applicable exclusion amounts and the generation skipping transfer (GST) exemption amount (the “applicable exclusion amounts”); the maximum 35% rate for estate, gift and GST taxes; and the 15% capital gains tax and dividend rates. Absent congressional action, as of January 1, 2013, the estate and gift tax applicable exclusion amounts will each be reduced to $1 million, and the GST tax applicable exclusion amount, which will be indexed for inflation, will be reduced to approximately $1.4 million. The maximum tax rate for estate, gift and GST taxes will increase to 55%. The capital gains tax rate will increase to 20% and dividends will be taxed as ordinary income.

There is much speculation as to whether these provisions will be allowed to sunset with no adjustment. It is widely believed that there will be legislation that will either extend the current $5.12 million applicable exclusion amounts for a limited period, or that, for a limited time, there will be a retroactive increase of the applicable exclusion amounts. President Obama has stated his view that the applicable exclusion amount for transfers at death should be $3.5 million and that the applicable exclusion amount for gifts should revert to $1 million, with a maximum transfer tax rate of 45%.

Please see full advisory below for more information.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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