Tax Payers Should Brace for Gift and Estate Tax Changes, Says Palo Alto Attorney
Palo Alto, CA (Law Firm Newswire) November 2, 2012 – Upcoming tax changes look to significantly affect many families when it comes to their home equity, life insurance, and 401(k) assets.
“With the Bush tax cuts slated to expire on January 1, 2013 if Congress does not act, lifetime gift and estate tax exemptions will drop to $1 million from just over $5 million,” said Palo Alto estate planning lawyer Michael Gilfix. “We are advising our clients that the generation skipping transfer tax exemption will also likely be indexed for inflation at approximately $1.4 million, with top estate tax rate increasing to 55% from 35%.”
While estate planning is a prudent financial step to manage and mitigate the affect the tax changes may have on an individual’s estate plans, estate planning attorneys are seeing an increase in clients looking to update all aspects of estate planning, including wills, trusts, durable powers of attorney and healthcare directives. And while financial advisers are urging their clients to look closely at how the current gift and tax rules might impact their estate, the new estate rules may affect individuals at lower income levels as well.
According to a recent report on consumer finances by the Federal Reserve, just 4.4 percent of U.S. households had financial assets exceeding $1 million. But when an estate is defined as including the assets of a primary residence, a private business and life insurance policies, the percent of U.S. households exceeding $1 million rises to 12.5 percent, says insurance marketing firm LIMRA. According to MIMRA, the average tax which will be due for those families is approximately $1.4 million.
Congress may decide to approve a widely-suggested compromise, a top estate tax rate set at 45 percent and a $3.5 million exemption, or it may decide to maintain the existing rules. If there is no new estate tax legislation tax, estate taxes at the 55-percent rate will impact millions of households. If existing rules are instead maintained, an estimated 43 percent of affected households do not have life insurance coverage which would meet the tax obligations, according to LIMRA. Those households will owe $3.1 million, on average, even after life insurance had been applied to estate taxes.
If Congress fails to compromise and does not change devastating estate tax rules slated for January 1, 2013, the number of estates that will owe estate tax at dramatically higher rates – will increase by millions.
To learn more, visit Gilfix & La Poll Associates LLP at http://www.gilfix.com/.
Gilfix & La Poll Associates LLP
2300 Geng Rd., Suite 200
Palo Alto, CA 94303
Telephone: (650) 493-8070
Facebook: Like Us!
- Considering the move to an active-adult community? We’ve got advice on evaluating the options.
As retirement nears, many older adults consider the benefits that an active-adult community can offer. For some, the option to downsize out of an over-large house can mean a more comfortable retirement and a larger estate to pass on to heirs. For others, the proximity to recreation and community promises to help keep them active […]
- Go Red for American Heart Month: Four fun ways to get heart-healthy with loved ones
February is a time for matters of the heart -- and that includes heart health. This month is American Heart Month, and groups like the American Heart Association want to get people talking about how to prevent heart disease, the number one killer of both men and women in the United States. The risk of […]
See other news sources publishing this article. BETA | Tags: palo alto elder law attorney, palo alto elder law lawyer, palo alto estate planning attorney, palo alto estate planning lawyer, palo alto estate tax lawyer, palo alto gift tax attorney, Palo alto gift tax lawyer