In our most recent post we talked about the federal budget and some of the ways that it might affect estate planning. Some commentators have expressed concerns that the tightening of federal purse strings might shrink the arsenal of estate planning professionals, leaving fewer options for people who want to formulate a useful, comprehensive plan.
Specifically, we talked about proposed restrictions on grantor retained annuity trusts. As the administration tries to close tax “loopholes” they have proposed a requirement that trusts have certain minimum terms, making it more difficult to save on estate and gift taxes.
The White House proposal could also establish new restrictions on dynasty trusts. Dynasty trusts allow planners in some states to transfer wealth from generation to generation indefinitely without any tax implications like estate, gift or generation-skipping taxes. The federal budget contains a proposal to cut off the the generation-skipping transfer tax after 90 years.
In addition, the proposed budget would eliminate one benefit of grantor trusts, which allow grantors to make gifts to beneficiaries that are free of gift tax if they pay the trusts’ income tax liability. The proposal would eliminate that benefit of the income tax payment, leaving beneficiaries vulnerable to gift taxes.
If you have questions about your estate plan – whether you have one in place or have been putting off starting one – it may be wise to speak with an experienced estate planning attorney who can help you review your financial situation and your unique needs, working with you to ensure your loved ones are taken care of in the future.
Source: Advisor One, “Obama Budget Endangers Some Estate Planning Techniques,” Michael Fischer, March 21, 2013