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President proposes changes to estate planning laws

The President of the United States recently revealed a new tax legislative proposal which could have significant implications for those concerned with planning their estates. The plan would revamp the Tax Code in a way that could increase tax liabilities for some beneficiaries in California and other states. This has caused many people to reexamine their estate planning strategies.

The President's proposed plan would increase taxes on capital gains and dividends to 28 percent of inherited assets that have increased in value. The proposed law would block accruals and contributions to IRAs and qualified plans once account balances hit $3.4 million. Although political commentators believe that the chances of the proposed legislation will pass into actual law are slim, this could be a sign as to the direction of future legislation.

Many are beginning to look into alternative estate planning options in case this proposal or a similar one in the future is enacted. The proposed hike in income and capital gains tax would increase the current rate of 20 percent by 8 percent. However, when one adds the net investment income taxation of the proposal, the total increase in tax liabilities will be approximately 31.8 percent.

Fortunately, there are various options available for alternative estate planning strategies in the case of the proposed legislation or similar proposals becoming law in California and elsewhere. However, it will be necessary to pay attention to the latest developments in estate planning law in order to make timely decisions. Alongside an estate planning lawyer, understanding the implications of any changes in the law will be helpful before deciding on the necessity of making alterations to one's estate plans.

Source:, "Weighing a Plan B in estate planning in light of Obama's proposed tax overhaul", Darla Mercado, Jan. 23, 2015

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