The Jan. 1 Fiscal Cliff planned this year and die next year may have their heirs a tad surprised. So because of the continued failure of Congress to act, come this Jan. 1, 2013, everything changes. We are going to shoot back to the law that existed in 2002 with only a $1.1 million death tax exemption and 55 percent tax rate on every dollar a decedent owns over that magic amount. Now planning your estate to avoid death taxes is ridiculously complicated.You can leave your stuff to someone outright, in his or her hands, but when they pass away it will be taxed again and so forth, so
that the only way to avoid the constant death taxation is with what is often a series of irrevocable trusts. When I say the phrase “irrevocable to trust” to a client, I can see their eyes roll at the thought of simply trying to understand what it all means. What it mostly means is it is not easy and is tied up in ways people find, at the very least, expensive and annoying. So what’s a person to do about all this? It seems we just rolled the dice when we cast our votes. Already the partisan rumblings are in full-tilt boogie, and no one really can even guess what will come next. But one thing is certain, whether it is your kids who would owe no taxes if you died this year or several million if you die next year, or all of us, small kids to the elderly, the effects are going to be huge. ~ Editor’s Note: Gale Allison is principal attorney at The Allison Firm, PLLC which limits it law practice to all matters involving estates and trusts including planning, taxes and disputes.
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Published on Nov 30, 2012