In January, President Obama signed the American Taxpayer Relief Act of 2012 into law, ending months of uncertainty surrounding the future of key estate tax provisions.
The new law, part of the federal package to avoid the dreaded “fiscal cliff,” enacted a number of permanent changes affecting estate planning. The estate tax exemption, originally scheduled to drop from $5.12 million to $1 million, is now locked in at $5.25 million for individuals and $10.5 million for married couples. However, the top estate tax rate, originally scheduled to increase from 35 percent to 55 percent, will rise to 40 percent in 2013 and beyond.
Estate planning is not just a strategy for high-wealth individuals. In fact, it can benefit most Americans, enabling them to leave more money to their loved ones by reducing requisite taxes, unnecessary litigation and various expenses.
One of the main goals of estate planning is to make sure the bulk of a given estate passes to the grantor’s beneficiaries. Although it’s advisable to take advantage of the tax benefits of the new estate planning laws in 2013, there are a number of other important reasons to consider a strategic estate plan.
First and foremost, an estate plan enables you to have control over the allocation of your assets, minimizing the probate court’s role in that process. Without a legally-binding plan in place, the State of Georgia will make decisions about your estate in accordance with the laws of the particular jurisdiction where your assets are held. This process takes place through Georgia’s probate system, which offers a way for the state to settle debts, pay taxes owed and resolve disputes regarding the estate. A well-crafted estate plan can facilitate the probate process
In addition, trusts help ensure that minor children or adults heirs who cannot manage their money responsibly will be adequately provided for, helping them make good choices in accordance with your wishes. This strategy can protect your estate from being depleted by heirs making poor decisions with your assets.
Estate plans also offer protection from creditors, which can be quite valuable to surviving family members’ trusts. Family limited partnerships, charitable remainder trusts and inter vivos qualified terminable interest property trusts are just a few of the options that can help protect your assets from creditors in the future.
Last but certainly not least, an estate plan can reduce tension between family members. Advance planning makes your final wishes regarding asset allocation clear and can help avoid unnecessarily family conflicts. Proper selection of fiduciaries can also reduce the possibility of friction among the beneficiaries.
When you decide to develop an estate plan, be sure to work with an attorney who has extensive experience with estates and trusts. The benefits of smart planning now can be reaped for generations to come.