Obama’s Re-election & the Fiscal Cliff Causes Explosive Growth of ‘Irrevocable Trusts' and Gun Sales Comments UltraTrust.com

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Many New Changes will likely affect estate planning options. What Do the New Tax Laws Mean to One's Estate Planning in 2013 and Beyond?

Obama Scaring People with Fiscal Uncertainty

Obama Scaring People with Fiscal Uncertainty

There were so many Irrevocable Trust's created in December due to last minute planning that the IRS website was down almost 50% of the time we tried to get EIN's for our clients.

Although there are no official records of the number of irrevocable trusts created in 2012, anecdotal evidence points to a record year. With the fiscal cliff looming and the threat of a one million dollar estate tax exemption, those with moderate assets flocked to professionals to take advantage of 2012’s 10.24 million dollar gift tax exemption for married couples. “We couldn’t keep up with the last minute procrastinators and had to turn a few last minute customers away in 2012. We are excited to have a new gift tax and estate tax exemption signed into law for 2013 to $5,250,000 for single and $10,500,000 for married joint filers. This huge gift horse is great news for those who can take advantage of this extended exemption,” declares Rocco Beatrice, Managing Director of Estate Street Partners, LLC.

President Obama and congress finally negotiated a deal to avert the fiscal cliff. They did so frantically, putting together a plan they could agree on at the end of the year. Here are a few highlights of the many last minute budget and tax structure changes:

  •     Tax rates for singles on incomes under $400,000 and couples under $450,000 receive the same tax cuts as last year. Those earning more will be taxed at 39.6 percent.
  •     The personal tax exemptions for singles making more than $250,000 and couples making more than $300,000 will be phased out.
  •     Capital gains tax will increase to 20 percent on individuals making more than $400,000 and $450,000 for families.
  •     The alternative minimum tax jump to $51,900 for singles and $80,750 for couples.
  •     The payroll tax cut will lapse bringing the payroll tax to 6.2 percent.
  •     The 2013 estate tax exemption and lifetime gift tax exemption changes to $5.25 million for individuals and $10.5 million for couples and the top rate increases on estate tax to 40 percent.
  •     The annual gift tax exemption increases to $14,000 for an individual and $28,000 for a married couple.

The last minute changes to the budget and tax structure at the end of 2012 reinforce the notion that asset protection and estate planning should be done early. “Nobody knows what next year will bring or what the next president might bring. What we do know is the current situation, and this year is favorable for people who want to responsibly plan ahead,” explains Rocco Beatrice. Using this year’s gift tax rates, a couple could place more than $10 million in an irrevocable trust for the benefit of their children or any other trust beneficiaries. If that money grows faster than the estate tax adjustment for inflation the surplus is still estate tax free, because only $10 million was already gifted.

Placing a business in an irrevocable trust also works the same way. A business gifted to a trust that is worth $10 million today might grow exponentially to $20, $30 or even $100 million over one’s lifetime. Because the $10 million business was gifted to the trust under this year’s $10 million gift tax exemption, the increased value in the future is exempt from estate tax. Adding other methods of estate tax reduction to an irrevocable trust, such as “discounting” can increase the estate tax savings even more.

What about the record number of people that created trusts last year? If the estate tax exemption decreases, the assets that they placed in trusts are safe from estate tax. If it increases they can still take advantage of it. Those that did not plan ahead are at the mercy of the next political cliff and those with moderate estates should start the planning process now. The estate tax exemption may change to anything, so a person with just a few million of assets could end up paying the tax, so planning early is still recommended by most estate planners.

“The estate planning catchphrase of 2012 was ‘irrevocable trust’ and I hope that people continue to think about trusts when it comes to estate planning. Last year’s volatility and indecisiveness of the president and congress should be a cautionary signal not to wait,” warns Rocco Beatrice. “A reputable estate planner and a solid trust, such as the UltraTrust©, can protect assets through the ebbs and flows of the governmental decision making process.”

About Estate Street Partners (UltraTrust.com):
For 30 years, Estate Street Partners has been helping clients protect assets from frivolous lawsuits while eliminating estate taxes and probate and ensuring superior Medicaid asset protection for both parents and children with their Premium UltraTrust® Irrevocable Trust. Call (888) 938-5872 to learn how one can save hundreds of thousands of dollars.

1. marketwatch.com/story/cracking-the-2013-tax-code-2013-01-03
2. cbsnews.com/8301-250_162-57561752/obama-signs-fiscal-cliff-bill-into-law/
3. forbes.com/sites/leonardburman/2013/01/01/senate-bill-averts-fiscal-cliff-for-now-while-ignoring-our-short-and-long-term-fiscal-problems/
4. IRS.gov
5. ultratrust.com

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