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2013 Estate Tax Law Updates

The New Year has arrived with all of its attendant changes.  Although Congress couldn’t seem to get its act together until after the deadline passed, they have ultimately settled on a few things, which is very good news for those of us who are trying to understand what our options are.  Here is a quick summary of some of the highlights of the 2013 American Taxpayer Relief Act that are particularly relevant to our clients:


     The gift and estate tax exemption amounts will be at least $5.12 million per person.  This amount will likely go up this year to $5.25 million due to inflation adjustments.  Thus, an individual may still gift or devise as much as $5.25 million  without incurring any transfer tax liability.

     The estate tax rate changed from 35% in 2012 to 40% in 2013 for those who die having more than the $5.25 million in their estates.  This means that if your estate is larger than this, additional planning strategies will need to be implemented to avoid paying the IRS $0.40 on the dollar for every dollar over this amount when you die.

     “Portability” will remain between spouses on the use of their estate tax exemption.  This means that a surviving spouse can use the other spouse’s unused estate tax exemption if the $5.25 million is not sufficient at the second spouse’s death.  However, portability is not automatic as the surviving spouse must make this election on a Form 706 after the first spouse’s death.  Such a filing must be made shortly after the first death or this benefit may be lost.  Although this benefit is certainly a good thing, it can lull people into a false sense of security regarding their estate tax liability and prevent them from doing the kind of planning that is much more certain to ensure that estate taxes are not a problem.

     The GST Tax (Generation Skipping Transfer Tax) stays at the same rates as the estate and gift tax.  This tax is imposed upon transfers of wealth over $5.25 million to individuals 37.5 years younger than the individual making the transfers, either through testamentary transfers or lifetime transfers.

     The annual Gift Tax exemption amount increased from $13,000 per person to $14,000.


Most of these changes to the estate, gift, and GST tax laws have been passed as “permanent” changes rather than under the “sunset” provision conditions that we’ve been dealing with for the last 10 or so years.  Thus, there is some measure of certainty going forward that this is going to be the law for some time.  I hope that is the case.  Nevertheless, Congress can change any of the laws just as soon as they decide it is prudent to do so.  So, any real permanence in these laws may in fact be illusory.  For the moment, however, I will operate under the assumption that these laws will remain permanent.

A Mother’s Love

If a theme is to be found from my many interviews with clients over the years, it’s that parents love their children and will do anything for them.  Over and over, when I work through the estate planning process with my clients, I find that the guiding principle motivating parents in their planning is the happiness and well being of their children.  Parents will frequently state to me that they are willing to do anything for the success and happiness of their children. 


This sentiment was proven again in a dramatic fashion recently.  You’ve likely heard by now about the amazing story of the mother in Louisville, KY who protected her children from almost certain death when a tornado with 175 mph winds ripped their brand new brick home to shreds.  If you’ve not seen the inspiring newsreport yet, it’s well worth watching.

Can You “Hide” Your Assets Legally?

I’ve had a number of clients ask me if it is possible for them to “hide” their money legally. The answer is, of course, not a simple one. It really depends upon who you’re trying to hide it from and how you define the word “hide” in this context.

Can you conceal how much wealth you have from those whom you casually associate with on a regular basis? Sure. Why not? Don’t dress expensively, drive a Maserati, vacation in the French Rivera, or live in a palace on the mountain benches and you’ll probably be able to fly underneath the radar of most people.

Put the Fun in Funding

The other day, my wife went over to her grandparents' home to help them make sure their trust was properly "funded." After her visit, she shared with me her grandparents' confusion about the funding process because they thought "everything was all taken care of" when they signed their trust document. This is such a common misunderstanding that I thought the topic of funding was worth revisiting today.

What Does It Mean to Fund a Trust?

Funding is the process of transferring ownership of assets from your individual name into the name of your trust (or making your trust a beneficiary of beneficiary-designated assets). The terms of your trust agreement will only control property that is actually owned by your trust. This is why funding a trust is just as important as setting it up.

I like to use the bucket analogy. Think of your trust as a bucket. Your trust document contains instructions on what to do with the things in the bucket. Funding is simply the process of putting things into the bucket.

Give Your Kids a Gift They Can't Give Themselves, Part II

Last week, I explained how using a spendthrift trust can protect the inheritance you leave to your children from divorces, lawsuits, and creditors that your children may encounter in the future.

However, even in those states that do recognize the validity of a spendthrift trust, there is nothing that you can do to prevent a creditor from attaching (getting their hands on) those assets once they've been distributed to the beneficiary (your child). In order to protect such distributions from the reach of creditors, the creation of a discretionary trust is very effective.

Give Your Kids a Gift They Can't Give Themselves, Part I

What would you say if I told you that you could give your children a gift that they can never give themselves and that this gift could possibly save your family hundreds of thousands, or even millions, of dollars? Sound too good to be true? It's perfectly legal (see the Utah Uniform Trust Code) and fairly simple with an asset protection trust.

Asset Protection Is Not Just for the Wealthy

Because asset protection is commonly associated with offshore planning, such as forming an asset protection trust in the Cook Islands, you might be thinking, "Asset protection? That's only for the ultra rich or for people involved in tax evasion!" But spendthrift trusts (a form of asset protection trusts) are readily recognized by many states and courts (including Utah) as a valid means of protecting assets for third-party beneficiaries (i.e., your children).

Change the Oil, Rotate the Tires, and Update Your Estate Plan


Blog Post by:  Melissa C. Platt, Esq.

If you own a car, you know it requires regular maintenance in order to perform well and be reliable. When you purchased your car, you probably received a recommended schedule for service. If you follow that schedule, most likely your car will continue to work well. If you don’t follow that schedule, you are taking the chance that your car will let you down.

Did you know that your estate plan also needs to be “serviced” on a regular basis? Your estate plan is based on a snapshot of your life at the time your plan was created. But over time, things change. Your family structure changes, your assets change, and the laws change too. Having regularly scheduled maintenance on your estate plan will ensure it doesn’t let you down.

How Often Should You Review Your Estate Plan?

When creating an estate plan, you should look for a lawyer who will review your plan at least every three years at no additional charge. Ideally, your attorney will offer a low-cost maintenance program that will allow you to have your plan reviewed annually and make any necessary changes. I know that seems like an extremely self-interested statement coming from a lawyer! And I am of the opinion that well-informed people make the best decisions, so I’ll lay out the options for you, and let you decide for yourself.


Can the Name of Your Trust Put You at Risk?

One of my clients approached me the other day with a concern that I felt deserved a thoughtful answer. This client had recently come across an article written by an attorney who claimed that naming your Revocable Living Trust (a very common estate planning tool) with your own family name could put your family’s privacy in grave danger. The article’s author claimed that such a practice “completely destroys the entire privacy prong of trust benefits.” [emphasis mine]. This statement is misleading for at least two reasons:

How Much for a Simple Will?

Blog Post by:  Melissa Christensen Platt, Esq.

This is by far the most frequently asked question we get, and I cringe every time I hear it (or variations of it) because I know the answer will be unsatisfactory to the person who has just asked the question and to me as well.

The biggest problem with this question is that it is impossible to answer directly. Why can’t a respectable estate planning attorney just quote you a fee right off the bat? Because estate planning is not “one size fits all” or even “one size fits most,” so estate planning fees can’t be one size fits all either. The question assumes that a will (or a trust) is right for everyone.

It’s kind of like walking onto a car dealer’s lot and asking, “How much for a car?” The answer will depend on whether you want an SUV, truck, van, or sedan, whether you want to buy used or new or lease, whether you want all the options or a stripped down model, and so on.

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