The Dynasty Annuity — Multi-Generational Tax Deferral for High-Net-Worth Families


Originally published in Tax Management Estates, Gifts, and Trusts Journal, x, 11/08/2012.


The current tax environment suffers from a lot of economic and political uncertainty. The general consensus of many tax professionals is that personal tax rates will increase in the near future. The Bush tax cuts are due to expire automatically without Congressional approval to extend these tax cuts on December 31, 2012.2 In an election year, that type of political will or intervention seems highly unlikely.

The expiration of the Bush tax cuts on December 31, 2012 will result in an increase in the top marginal income tax bracket to 39.6%. Additionally, a Medicare tax related to new federal healthcare provisions will add an additional 3.8% tax on unearned income in excess of $250,000. The long-term capital gain rate increases to 20%. The estate and gift tax exemption decreases from $5 million to $1 million per taxpayer and the top marginal estate tax bracket increases back to 55%. Multiple tax proposals advocate an additional 5.6% tax increase for taxpayers with incomes in excess of $1 million.

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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.

© Gerald Nowotny, Law Office of Gerald R. Nowotny | Attorney Advertising

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