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Year-End Estate and Gift Tax Planning Points

With a little more than one week left in the year 2009, we wanted to provide a few reminders and planning points that should be considered:

1. Irrevocable Life Insurance Trusts (ILITs): If you have made contributions/deposits to your ILIT for payment of the premium this year, have you also prepared and sent the annual Crummey letter? (Named after the court case that provided for completed-gift status of annual exclusion gifts for payment of life insurance premiums). Consistent with the funny-named case on this point, letters should be sent to the trust beneficiaries informing them that a deposit has been made in the trust’s account and that the beneficiaries are entitled to request withdrawal and payment from the trust.

2. Annual Gifts: For tax year 2009, Federal tax law permits a person to give up to $13,000 per year to any other person (and as many people as one may choose). This is called the “annual exclusion” amount. If you have given away cash or property in excess of this amount during this calendar year, then a gift tax return should be filed to report this fact. Please call us or notify your CPA to make sure this important return is prepared and filed. Gifts in excess of the $13,000 are taxable, but if you have remaining “lifetime exclusion” amount you can apply this to this gift so that no tax payment is required. If you have not made annual gifts this year, it is not too late to do so if this is part of the strategy you and your attorney have implemented for reducing your taxable estate.

3. Other items to consider relating to your basic estate planning:

Have there been marriages, divorces, births or deaths that would impact your current plan?

Are your home and/or other real properties owned by your trust? (We frequently discover that when a client refinances a property that this event will often result in the removal of the family trust as the owner of the property.

Are all your accounts owned by your trust? (Newly opened accounts may have been overlooked).

Are the balances of your accounts within “safe” FDIC limits?

Are your Successor Trustees, Executors, and named agents on your powers of attorney still appropriate? (Watch for an update on powers of attorney in our upcoming Client Focus newsletter)

Have you met with an attorney to review your plan within the past few years? 2010 may be a monumental year for changes in the Federal Estate Tax with the repeal for estate tax looming. This will likely have an impact on almost every old estate plan.

-Attorney Jason Walker