Allow me to be simple and to the point; if you have a net worth of $1M or more (or as a couple, $2M or more), and you act now, you could forever remove the threat of estate tax. But if you don’t act by the end of the year, you will miss a historic opportunity.
The 2012 estate tax exclusion and gift tax exclusion are both $5,120,000 – way higher than they have ever been, but unless Congress and the President act before the end of the year both will fall to $1M come January 1, 2013.
If you would happen to die with more than $1M after December 31, 2012, every dollar over $1M will be taxed at 55%. If you would pass with a $2M estate, your children will get $1,450,000 and the government will get $550,000.
But here’s your big chance: If you ‘gift assets’ out of your estate before December 31, you can remove up to $5,120,000 (double that for married couples) from your taxable estate.
Don’t think this opportunity is only for the extremely wealth.
If you have assets that will appreciate – like real estate, business interests, or other investments, you should take advantage of this historic opportunity to remove assets and all future appreciation from your taxable estate.
I know what you are thinking – ok, I get it, I should remove assets from my estate to avoid a future estate tax, but I will need those assets. Can I gift them, and still benefit from them? The answer is YES.
A lifetime exemption trust, sometimes called a spousal lifetime access trust, can remove the asset from your estate and give you indirect access to the income.
Here’s how it works:
1. Create an irrevocable trust which names your spouse and children as beneficiaries.
2. Your spouse can be the trustee and direct the investments and distributions.
3. Transfer assets to it before the end of the year.
4. Your spouse, as trustee, can distribute income from the trust to her and deposit it in your joint account – which means you will have access to the trust income, even though you gifted away the assets.
Your spouse can also create a lifetime exemption trust which names you and your children as beneficiaries. However, this second trust must be drafted very carefully with different provisions than the first one to avoid the reciprocal trust doctrine. If the IRS determines the two trusts are identical, it will pull the gifted assets back into your estate.
This is just one of many gifting strategies available through the William Jessup University Development Office and our Planned Giving Attorney Clark Allison.
If you would like to leverage this historic gifting opportunity, the time to act is now; planning will most likely take several weeks to complete and time is running out.
Give me a personal call at the WJU Development Office (916-577-1800) and I can personal help in scheduling an introductory conversation with Mr. Allison.
Your stewardship will protect your assets from the government’s high taxes, secure your spouse and family economic futures and directly benefit William Jessup University as a named beneficiary with this type of irrevocable trust.
Please give me a personal call today if I can be of any assistance in this option. And thank you for who you are, and what you do to serve others through William Jessup University.