One of the most challenging factors in estate planning can be preserving your assets for heirs and beneficiaries. When wills and trusts are not set up properly, monitored and changed appropriately, assets that were meant for loved ones can turn into unintentional government tax revenue.
Estate planners have been urging clients with sizeable assets to pay special attention to congressional action on the federal estate tax. The liberal $5 million estate tax exemption and 35 percent tax rate were expected to expire at the end of this year. Congress recently voted to keep those beneficial amounts intact through 2013.
Federal lawmakers made no promises to keep exemptions or the tax rates at those levels beyond that date.
Individuals now have an extra year to strategize asset protection plans according to these generous standards. Unfortunately, the extension may not be repeated beyond next year. Without a congressional compromise after the presidential election, there is a strong likelihood that the $5 million exemption rate will fall to $1 million and the estate tax rate will jump from 35 to 55 percent in 2014.
The uncertainty of future estate tax laws has many individuals searching for ways to protect what they hope to share after death. One suggestion estate planners make is the purchase of life insurance policies to cover the tax burden of heirs.
A tax professional, legal advisor and insurance expert can help you review the policies you already have. If old policies are too costly or don't serve the purpose for which they were intended, it might be time to sell them and reinvest in better coverage.
If an estate is worth less than $5 million - as long as tax rates and exemptions remain constant - the extra insurance protection may be unnecessary.
Source: huffingtonpost.com, "Life Insurance Can Be Your "Lifeline" In Estate Tax Debate," Wm. Scott Page, Aug. 9, 2012