As Jason, mentioned in his blog, we are writing more on the estate and gift tax consequences of the fiscal cliff. While all of us are hopeful that there will be a political compromise with respect to both income and estate and gift taxes between now and year-end, it is likely that this will probably not be sorted out until 2013, with the compromise to be retroactive to January 1, 2013.
If Congress fails to act, and the gridlock continues, as of January 1, 2013, the following will occur with respect to gift and estate taxes:
While, there is no “one size fits all” solution to this issue, we recommend that you maximize your gifting this year by making year end gifts so that you can pass more assets free of estate and gift taxes.
Many clients do have a concern that if they gift too much away they could run out of assets. Popular solutions to this have been (1) have a spouse as a beneficiary of the trust and assume that as long as the spouse is alive the donor can derive indirect benefit by being supported by the spouse while the spouse is being supported by the trust, and (2) forming a Nevada asset protection trust, which we call a Nevada On-Shore Trust (a “NOST”), since the IRS has ruled in at least one case that the contributor can be a discretionary beneficiary and actually receive the benefit of trust assets if and whenever they may need it.
It is important for you to schedule a time to meet with one of our attorneys to develop a personalized plan that meets your estate planning needs. Please contact us as quickly as possible if you have any questions or if we can be of assistance between now and year end.
Attorney Rick Cunningham