LAS VEGAS – Planning for a financial future once the heads of the family pass away is a necessary discussion many families put off. With estate tax laws set to drastically change in 2013, some families may have to have the conversation with their estate planning attorneys sooner rather than later to preserve their estates’ value.
An estate tax exemption is the amount anyone can give away tax free during their lifetime or at their time of death. For 2012, the amount a person can transfer tax free is $5 million. The excess amount in the estate, if any, is taxed at 35 percent. In 2013, the estate tax exemption is set to decrease to $1 million with any excess amount taxed at 55 percent.
“To simplify it, if someone has an estate valued at $6 million and gifts $5 million in 2012 and then passes away in 2013, $1 million of their estate will be taxed at 55 percent, which equals $550,000 in estate tax,” said Brooke Borg, founder and attorney for Borg Law Group. “However, if this same person doesn’t choose to gift their $5 million until after they die, and they pass away in 2013, $5 million of their estate will be taxed at 55 percent, equaling $2.75 million due in estate tax. That’s a substantial loss that could have been avoided.”
The current rates took effect in January 2011 and will last through the end of 2012. Therefore, over the past year and a half, many people have decided to take advantage of the higher than usual exemption amount and use their exemption by gifting assets this year before the scheduled change in laws in order to save their estate money in the long run.
For married couples, the current laws allow $10 million, or $5 million each, for the tax exemption. Also, if one spouse dies without using the tax exemption, the unused portion can be claimed by the surviving spouse at his/her death.
“If the amounts set to take effect in 2013 do not change, many people will be affected negatively if they do not have the proper estate planning documents in place. Anyone whose assets even come close to $1 million taking into consideration real estate, investments, life insurance, vehicles, bank accounts, 401ks, etc. should speak to an estate planning attorney soon,” Borg said. “Although we’re still in the first half of the year, it takes time for gifts to funnel through the proper channels. Starting now will ensure all gifting is done in a timely manner.”
Borg Law Group provides legal services to individuals and businesses in the areas of real estate, corporate law, estate planning and probate. The firm’s founder, Brooke Borg, is admitted to the State Bar of Nevada and the State Bar of Michigan.
For more information regarding Borg Law Group call 702-318-8808 or visit www.BorgLawGroup.com.