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Hamilton Plans Newsletters

Fall 2012

With Gift and Estate Tax Laws in a State of Flux,
Are There Planning Opportunities for ­Larger Estates?

Calendar year 2012 provides extraordinary planning opportunities, including:

  • The current gift and estate tax unified credit allows each individual to transfer to family and friends up to $5,120,000 ($10,240,000 for a couple) in lifetime gifts. Absent action by Congress, this amount will be reduced to $1,000,000 ($2,000,000 for a couple) for 2013.
  • In the remaining days of 2012, an individual who, for example, has already used $1 million of his/her gift tax exemption may make $4,120,000 in additional lifetime gifts free of transfer tax by simply writing checks to family and friends or utilizing various trust options, such as:

Spousal Access Trust — Benefits may include asset protection, estate tax protection, direct descendent protection and income shifting.

Irrevocable Life Insurance Trust — None of the assets of an ILIT will be included in the individual’s taxable estate, making the proceeds free of both income and estate tax.

Dynasty Trust — The grantor is allowed a lifetime generation skipping transfer (GST) exemption on the first $5,120,000 of taxable transfers to a skip person or a trust that could benefit a skip person. A husband and wife can combine their GST exemptions.

Income Shifting Trusts — Parents can move up to $10,240,000 in income-producing assets free of gift tax to their children, who can then use the income for personal purposes or to make investments.

  • After utilizing the $5,120,000 exemption, it may be advantageous to give away more and pay the gift tax at the current 35% gift tax rate since the rate may increase in 2013.
  • A Charitable Lead Annuity Trust allows the donor to leverage the transfer of assets to family and friends while benefitting Hamilton in the meantime.

You are urged to discuss these matters with your tax and legal advisors.