The estate and succession planning deadline | Ben Esget

By Ben Esget
Contributing Writer 

The end of 2012 marks a serious deadline for high net worth households.

For 2011 and 2012, the amount that a person can transfer either during life or at death while avoiding gift and estate taxes has been increased to $5 million. This means that until the end of this year, a person can make lifetime gifts of up to $5 million using his or her exemption without paying gift tax.

At death, an individual can use their estate exemption to pass along any remaining exemption amount, free of estate tax. The exemptions hold for both spouses.

That means that for the remainder of this year a couple can gift or transfer assets up to $10 million to their heirs while avoiding both gift and estate taxes.

At the end of 2012, the gift and estate tax limit is slated to fall to $1million. For a couple, this would reduce the amount they can gift tax free to $2 million.

The federal gift tax rate is currently 35 percent, and the top estate tax rate for 2013 is 55 percent. This would mean waiting on an estate equal to or greater than
$10 million, a tax bill of $2.8 million at the low end, $4.4 million at the high end, while acting before year’s end would be zero.

Many people may be affected by this policy and not even be aware.

For individuals with a net worth greater than $1 million or couples with a net worth of greater than $2 million, they must realize that every dollar over these limits is subject to a huge penalty if they wait.

Recently, a client was in my office, and we discussed a privately held stock that her 85-year-old mother owned. With her home and some other assets, the estate quickly surpassed $1 million. She had no idea she was worth that much or that making some changes within her estate now could actually save the entire family hundreds of thousands of dollars in taxes.

Think about it. A elderly woman with a net worth of $1.6 million relying on her will at death instead of making a gift today would subject her estate to an additional tax of more than $250,000.

If you think this change in the law might impact your estate, you should review your assets and net worth so that you are not forced to hand “Uncle Sam” more of your hard earned dollars.

Ben Esget is the president of WealthMark LLC, an investment firm in Bellingham. His columns appear on every other Wednesday. Esget also runs the finance blog, in an effort to level the playing field between Wall Street and Main Street. Contact him at 360-734-1323 or

Author’s note: The information in this column should not be construed as investment advice. Everyone’s goals and investment portfolios are unique. Please contact a financial adviser or an accountant for your particular needs.

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