An Estate Planning “Perfect Storm”

Investment News published a story yesterday declaring that the current financial, political, and social climate made it a “perfect storm” for estate planning. It was explained how tax policy proposals, low interest rates, and a relatively weak economy make now a particularly worthwhile time for local families to take steps to plan for their long-term financial future. Our New York estate planning attorneys continue to help many local families do just that. As one observer explained in the article, “If individuals are trying to transition assets to the next generation, we currently have a perfect storm–in a good sense–to do it.”

Any time is a good idea to visit a professional and make future financial preparations. However, it may be particularly valuable to do so now, because planning strategies currently available might soon be gone. For one thing, large estate tax and gift tax exemptions now make it possible for individuals to transfer up to $5 million (or $10 million for couples) tax free. However, it is unlikely that the current tax scheme will remain–it is only a matter of what changes will be made and when. Observers have noted that estate rules have been changed 19 times in the last quarter century alone.

The current climate may present particularly attractive options encouraging some families to make major decisions to save on taxes and pass on assets. But many advocates explain that the tried and true planning tools that have long been available often remain the best way for many community members to accomplish their long-term estate planning goals. For example, while it may be favorable to give large gifts in the current environment, many families are uncomfortable making extremely large gifts. Instead, their goals may be best met by making smaller gifts under the $13,000 annual exemption amount. Those families can then save on estate taxes down the road by setting up trusts that distribute money more conservatively along the way.

No matter what the economic or political climate, trusts remain a primary tool to flexibly transfer assets and save on taxes. A variety of different trust mechanisms remain available to residents to customize their estate planning and gifting strategies. Grandparents can set aside funds for grandchildren by using a generation-skipping trust. Charities can be provided for through use of a charitable remainder annuity trust. Of course the first step in tailoring a plan to meet your specific goals is visiting an area estate plan attorney to explain your wishes and learn how they can best be fulfilled.

See Our Related Blog Posts:

Federal “Super Committee” May Target Gift Tax in Deficit Reduction Scheme

Proposed Tax Policy Changes May Affect Future Options for Estate Planners