James C. Kovaleski, Esq, is an associate attorney with OWM Law and Co-Chair of the Estate Planning Practice Group. Mr. Kovaleski concentrates his practice in the Estate Planning and Administration, Elder Law, Tax Law, Business Planning and Real Estate Transaction areas.
Mr. Kovaleski is active in the Phoenixville area, working out of OWM Law’s Phoenixville office, serving as a Phoenixville Council member, as well as serving on the Boards of various local non-profits. He lives in Phoenixville with his wife and daughter.
The material in this publication was created as of the date set forth above and is based on laws, court decisions, administrative rulings and congressional materials that existed at that time, and should not be construed as legal advice or legal opinions on specific facts. The information in this publication is not intended to create, and the transmission and receipt of it does not constitute, a lawyer-client relationship.
Estate Planning for the "Fiscal Cliff"
The "Fiscal Cliff" is a shorthand term that is used to describe the planned expiration of certain tax cuts in 2013 which will occur at the same time as deep federal spending cuts. There is discussion that a compromise may be reached before these tax cuts and spending cuts occur; however, given the pending election, a compromise before the end of 2012 may not be reached.
Due to this uncertainty, it is important for individuals to review their estate plan. Particularly, individuals with assets of approximately $1,000,000 or more should review their estate plan, as the federal estate tax exemption, which is currently in excess of $5,000,000, will be reduced to $1,000,000 if we go over the "Fiscal Cliff." For the purpose of the federal estate tax, the estate includes, but is not limited to, a home, investment accounts, bank accounts, life insurance policies, and retirement accounts.
Given the uncertainty with respect to the federal estate tax exemption, there may be ways to build flexibility into your estate plan by incorporating disclaimer trusts or other tax planning devices, which may result in significant estate tax savings if the federal exemption is lowered. Also, it may be appropriate to supplement your current estate plan with estate planning devices used to provide liquidity which may pay federal estate tax, if one is due.
In addition to estate planning, there are opportunities to take advantage of the current gift tax exemption, which is also in excess of $5,000,000. This can be done using certain trusts which help leverage the current depressed values of many assets using the federal gift tax exemption to transfer wealth to another generation, while retaining the benefit of that wealth for a period of time. Some examples of these types of trusts are a Qualified Personal Residence Trust (QPRT) and Grantor Retained Annuity Trusts or Grantor Retained Unitrusts. These trusts allow an individual to place property or assets into a trust, retain the use of that property or assets for a period of time, and then ultimately transfer the remainder interest down to their children, and possibly experience tax savings.
The attorneys at OWM Law are prepared to help our clients address the "Fiscal Cliff" and to help them arrange their estate plan accordingly. If you have any questions, please do not hesitate to contact OWM Law.
Information regarding Estate Planning and the "Fiscal Cliff" is featured in this month's episode of OWM Legal Talk, which can be viewed on our website at www.owmlaw.com/legal_talk/legal_talk.php.
David A. Megay, Esq., speaking at SCORE Business Planning Seminars, New York Plaza Building, Pottstown, PA, on 11/5/12 and 1/7/13 (contact SCORE at 610-327-2673).
Read Legal Ease every first and third Sunday in the Pottstown Mercury.
Watch Legal Talk, brought to you by OWM, on PCTV, Tuesdays at 8:30 on Channel 28, and Thursdays at 9:30 p.m. on Channel 98, or on our website at www.owmlaw.com/legal_talk/legal_talk.php.