ESTATE PLANNING:
The Fundamentals
By Denis Dillon
T
he fundamental issues in estate planning do not vary
greatly from one person to another. Our clients are
generally most interested in what is going to happen to
their assets when they die, the impact of transfer taxes (often
called,“death taxes”) on their estate plan, and whether steps
should be taken to minimize the involvement of the Probate
Court after their death (often called,“avoiding probate”). Clients
with minor children are concerned about protecting them by
naming appropriate guardians and ensuring that their assets
are not distributed to them at too early an age. Our clients are
often interested in executing or updating advance directives, i.e.,
a Durable Power of Attorney for Health Care/Living Will and a
Durable General Power of Attorney (for financial matters).
Federal Death Taxes
The federal laws changed substantially in 2013 with respect
to federal transfer taxes (i.e., the Gift Tax, Estate Tax and Generation-Skipping Transfer Tax). However, the federal government
is closely scrutinizing these laws, and may change them again in
the future.Your attorney should review your assets carefully and
help you develop a plan that should minimize the impact of these
changes on your estate plan. There are three general principles
that are helpful to understand with respect to these taxes. First,
the Unlimited Marital Deduction allows a married couple who
are United States citizens to transfer unlimited sums of money or
assets between themselves. Quite simply, there is no transfer tax
imposed on a gift from one spouse to the other spouse or when
the first spouse, at death, leaves assets to the other spouse.
Second, there is what is often referred to as the Applicable
Exclusion Amount. This is the amount that an individual can
gift or leave at death to someone (other than a spouse) free of
any federal transfer tax. The Federal Estate, Generation-Skipping
Transfer and Gift Tax rates are set forth in the following chart:
2015 Issue 3 |
THE
SCORE
32
Year
Applicable Exclusion
Amount (Estate Tax)
Top Estate, GST
and Gift Tax Rate
2015
5.43 million 40 percent
(indexed for inflation)
Third, there is the Annual Exclusion. This is the amount that
an individual can gift to ano \