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Rushed California estate planning quieted by Taxpayer Relief Act

The Taxpayer Relief Act of 2012 was the subject of a recent meeting of estate planners from Los Angeles and across the country. Estate planning specialists spent much of last year bolstering trusts for clients in anticipation of less-generous gift and estate tax changes in 2013. The changes were not as dramatic as expected.

Some of the estate planners admitted spending the last months of 2012 frantically creating tax-free options for wealthy clients. The Taxpayer Relief Act, enacted with the first of the year, put an end to the worry by changing almost nothing about federal estate and gift taxes.

Compared to what might have happened without congressional action, the new tax laws were very much the same as last year's laws.

Without the Taxpayer Relief Act, the estate tax-free ceiling would have dropped to $1 million per individual, down from over $5 million. For taxable assets, the federal rate might have risen to 55 percent.

The 2013 unified credit - for gift and estate tax exclusions - is $5.25 million per person for assets given away before and after death. The basic exclusion was $5.12 million in 2012. The difference is an inflation adjustment making the tax-free amount essentially the same.

The estate tax climbed from 35 percent in 2012 to 40 percent for 2013, 15 percent less than feared.

Some estate planning clients will take a new approach to asset disbursement, like the opportunity to give away $14,000 per year to individuals without affecting a lifetime tax exemption. Others will turn from heir tax protection to personal long-term planning for later-life needs like health care.

The race to beat the clock ended, not with a blind dive off a steep fiscal cliff, but with an almost seamless transition from one tax year to the next. Legal experts and clients now have the time to devote to full-scale estate planning projects instead of panic-mode measures.

Source:, "Morphing Into The New Age Of Estate Planning," Deborah L. Jacobs, Jan. 15, 2013

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