Estate Planning Resolutions for 2012
Taking Advantage of High Exemptions
As we begin a new year and compile our lists of 2012 "to-dos," there is one thing that should be near the top Estate Planning. Whether you are interested in creating a new plan, updating an existing plan, or supplementing your current plan with additional planning techniques, 2012 is the year to do it.
The opportunities presented by the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, which was signed into law on December 17, 2010, are set to expire on December 31, 2012, making this year an important one for those interested in minimizing their estate and gift tax obligations. In 2012, the unified gift and estate tax exemption is $5.120 million with a top tax rate of 35%. However, if Congress does not act, this exemption amount will drop dramatically in 2013, returning to $1 million with a top tax rate of 55%. It is more than likely that these exemptions will not stay at (or later return to) the 2012 levels, making this year a crucial one for tax planning.
Estate Planning for Young Adults
Adults with taxable estates are not the only ones who should make estate planning a priority this year. The truth is that everyone 18 or older needs an estate plan regardless of asset level. Having an estate plan in place provides those closest to you with a mechanism to make medical and financial decisions on your behalf in the event of an accident, health incident, or financial emergency. By executing health care and financial powers of attorney, the family member or friend appointed to serve as your agent will be able to take care of your health care and financial affairs without seeking court approval. Otherwise a court ordered guardianship may be required. At death, without an estate plan your family will have to work through the court system to wrap up your affairs and transfer your assets. Regardless of your asset level, this creates unnecessary hassle and cost.
Estate planning becomes particularly important when you have minor children, as this is the way you nominate guardians and direct how your children are to receive your assets upon your death. Guardianship of your children is simply not a decision to be left to the court system. In addition, it is important to note that even a small inheritance may be inappropriate for receipt by a minor without the protection of a trust or other safeguards. Here, too, executing a simple estate plan will help alleviate some of the administrative headaches for your friends or family who are charged with collecting and transferring your assets and/or caring for your children.
Providing your family and friends with guidance and planning to alleviate the burden of administering your assets is one of the best gifts you can give in 2012.