Obama to Upend Current Estate Plans, if Republicans Allow

If Obama is to upend current estate plans, elder-law attorneys are the “best resorts.”  Take the tax change proposals our President recently made, and which anyone can view. These changes spell CAUTION for the wealthy and/or those who’ve worked diligently and saved and invested wisely for themselves, and their progeny.:

  • Estate Tax Exemption–The clock may be turned back to 2009, when this exemption was $3.5 million each. It’s $5.43 million this year.
  • Top Tax Rate–In 2009, this rate was 45%. The current 40% may be increased.
  • Lifetime Gifts–may go back to $1 million per person. (Right now, you can make “as many $14,000 gifts to as many people as you want”–tax-free.)
  • Generation-Skipping Trusts(GSTs)–could be limited to $1 million a person, and “limited in duration.”
  • Life Insurance–There’s a possible “$50,000 overall limit for certain gifts, such as transfers to trusts, or family limited partnerships.”  So, irrevocable life insurance trust premiums would be capped at $50,000.
  • Elimination of Stepped-up Basis–“Heirs would have to pay capital gains tax on any appreciated assets.” It doesn’t matter the death date value of the assets you were willed years ago. A $100,000 exemption would save smaller estates.
  • Capital Gains Tax Rate–could go as high as 28%.
  • Carried Interest–If carried from previous years on “ordinary income,” it could be taxed.
  • Cost Basis of Stock–might be figured by “averaging,” instead of the current practice of “identifying cost by specific shares.”
  • Non-Spouse Beneficiaries–may be required to “take inherited distributions” from IRAs and 401(K)s “over no more than five years.”
  • Tax-favored Retirement Benefits–could be capped at $3.4 million, so you’ll receive no more than $210,000 a year starting at age 65.
  • Backdoor IRAs–would be eliminated, making it impossible for high-income investors to contribute mightily to traditional IRAs, then shortly thereafter, convert them to Roth IRAs.
  • The “S” Corporation Payroll Tax Loophole–would be closed by making “professional services providers”–like lawyers and accountants–file as self-employed.

We suggest you “make hay while the sun shines,” and contact us to take advantage of estate tax laws as they currently exist.

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