Five Ways to Help Clients Capitalize on the New Estate Tax Laws
5. Make Charitable Donations From Your Individual Retirement Accounts
Congress in 2011 reinstated the ability for individuals to make direct, qualified charitable distributions from their IRAs in amounts up to $100,000 by IRA owners who are at least 70 1/2 years of age.
4. Annual Gift Tax Exclusion Still Applies But Lifetime Amount Increases
The annual gift tax exclusion still remains at $13,000 per person, per year but the lifetime exclusion is now $5 million instead of $1 million. Keep in mind, a mother and father could each gift up to $13,000 apiece to each of their children ($26,000 total) but now they can keep on giving until they've given a total of $5 million each to an individual recipient.
3. Give More Than Ever During Your Lifetime
The new federal gift tax exemption is now $5 million through 2012, meaning those inclined to give gifts to family and friends can now give up to $5 million throughout their lifetime (previously was only $1 million) without incurring a pricey federal gift tax of 35% on any sum over the limit.
2. Portable Estate Tax Exemptions In 2011
Executors are now able to transfer to the surviving spouse any unused estate tax exemption (now up to $5 million) from the first spouse's death.
"Before now, married couples would have to do a bypass trust," Ullmann explained. "Now one spouse can use both spouses' exemption, meaning married couples can now transfer $10 million to their beneficiaries."
1. New Special Estate Tax Option For People Who Died In 2010
For any spouse or relative who passed away in 2010 and left behind a substantial estate, there's now a $5 million exemption, meaning that any estate worth $5 million or less is now not taxed at a 35% rate.
More important for the recipients, the new law includes a stepped-up income tax basis for appreciated assets. So, for example, if a recipient's grandfather left an estate that included shares of a particular stock that he purchased at $4 a share and are now trading at $36 a share and the recipient opted to sell the shares, he or she would not be subject to capital gains taxes on the $32-a-share spread.
And if he or she opts to hold the stock and then sell them down the road, the recipient will only be hit with capital gains taxes on any value above the $36-a-share price the stock was trading at the time he or she inherited the stock.
Five Ways To Capitalize On The New Estate Laws For 2011
According to Brian Ullmann, a financial consultant at Fresno, Calif.-based Ford Financial Group, new changes in estate planning and tax laws in 2011 will give investors and their families more options and flexibility to move around and share large sums of cash without incurring -- or saddling heirs -- with a stiff bill.
"Overall, the theme right now is that we are probably in the best or one of the best environments to gift or transfer wealth in history," he said.
Check out five essential things to consider that could help your clients as they consider the new regulations.