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Estate planners may need to consider adjusting for higher taxes

In the midst of a bitter political battle in the United States, largely over how taxes will be handled under the next presidency, investors are beginning to worry about increased taxes and estate administration.

While Democrats are pushing to cut the national debt through increased taxes and decreased spending, Republicans are pushing for decreased spending alone. Regardless, those with high-asset estates are likely aware that the tax cuts under the Bush administration will expire in 2013. In 2013, single filers with income more than $200,000 with revert to the old maximum tax level of 39.6 percent.

Some estate administrators are considering taking advantage of certain tax breaks while they last. For example, 2012 is the last year with a $5 million gift tax exemption. In 2013, the exemption will again drop to $1 million. Estate tax breaks can also be had in states like Florida, where you are allowed to give anyone a gift of as much as $13,000 without paying estate taxes every year. If paying a person's school tuition or medical bills, the gift is not counted towards the limit.

Such exemptions have caused some people to consider gifting away a portion of their estate early to avoid estate taxes when the time comes. Some experts recommend starting a Roth I.R.A. for heirs that work part time or during the summers, which can include contributions up to $5,000 a year. The heir can withdraw the money before retirement.

Most experts agree that the best time to plan for your estate is now, before estate taxes potentially become a very difficult bill to pay in the coming years.

Source: nytimes.com, "Take Advantage of Tax Breaks Now, Experts Say," Jan M. Rosen, Oct. 18, 2011

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