The year-end is coming up and with all the talk about the fiscal cliff, people might be asking what their year-end tax moves should be. And if their estate plan factors into their year-end planning, they might also be asking what their year-end estate planning moves should be.
There’s been extensive talk on this blog about the year-end tax debacle with the estate tax going back to a $1 million exemption amount.
With December 31 only weeks away, there’s still no accord in the legislature and while the fiscal cliff is an issue that affects many different taxes, the estate tax proved to be a contentious aspect of that debate.
In fact, Democrats can’t even agree among themselves on what to do with the estate tax, writes The Wall Street Journal. While some are predicting that there could be a temporary halt of the fiscal cliff with a small extension of the tax breaks, many are setting their sights on the higher taxes that loom ahead. And they’re adjusting their estate plans accordingly.
The biggest way that many are taking advantage of the great tax breaks this year is to give, give, give! But there are many reasons why this won’t work.
To begin with, making an irrevocable gift isn’t for everyone. Not everyone has the money to make a $5.12 million gift. Of course, one doesn’t have to make a gift of the full exemption amount to benefit from the high exemption right now. But any gift over $1 million would be wise, as the exemption looks like it will be dropping to $1 million, from where we stand today.
Gifting is irrevocable and a family really has to weigh out their current financial needs over any long-term tax break. More about this in tomorrow’s blog post.
The second aspect of gifting is that it takes time to make a complete gift and incorporate it into an estate plan. With this being the month of December already, that tiny window of opportunity to update one’s estate plan may have passed.
In the coming days, there will likely be more news on the direction of tax law and the fiscal cliff. But with December 31 coming up fast, time will tell.
- Search Directory of New York Estate Planning Lawyers (FindLaw)
- Beware of Formula Clauses and Estate Tax Uncertainty (FindLaw’s New York Estate Planning News)
- The ‘Fiscal Cliff’ and What It Means for Estate Planning (FindLaw’s New York Estate Planning News)