Post-election estate planning

By Julius Giarmarco

Giarmarco, Mullins & Horton, P.C.


Many high-net-worth individuals were sitting on the sidelines waiting to see who won the election before taking advantage of the $5.12 million gift tax exemption. Their hope was that Governor Romney would win the election and carry through on his promise to repeal the estate tax. Now that President Obama has won the election, the repeal of the estate tax is unlikely. More likely, perhaps, is the president’s 2013 budget proposal of a $3.5 million estate tax exemption, a $1 million gift tax exemption and a top tax rate of 45 percent.

With the hope of the estate tax disappearing now gone and the probability of a much lower gift tax exemption on the horizon, time is running out for high-net-worth individuals to take advantage of their $5.12 million gift tax exemption. This is particularly true for those persons who wish to gift hard-to-value assets that require appraisals.

To add to the urgency are three estate tax proposals that are part of the President’s 2012 budget. One proposal would subject intentionally-defective grantor trusts to estate taxes at the grantor’s death. Another proposal would eliminate discounts when valuing non-voting or minority interests in family limited partnerships or family LLCs. And another proposal would subject dynasty/perpetual trusts to estate taxes after 90 years. However, funding grantor/dynasty trusts with discounted assets before year end would probably be grandfathered.

As a result of all of these potential changes, more wealth may be transferred in the last few weeks of 2012 than ever before. But time is running out on what may be the greatest wealth transfer opportunity ever.

THIS ARTICLE MAY NOT BE USED FOR PENALTY PROTECTION. THE MATERIAL IS BASED UPON GENERAL TAX RULES AND FOR INFORMATION PURPOSES ONLY. IT IS NOT INTENDED AS LEGAL OR TAX ADVICE AND TAXPAYERS SHOULD CONSULT THEIR OWN LEGAL AND TAX ADVISORS AS TO THEIR SPECIFIC SITUATION.