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Another reminder to act now on tax issue

As the months are flying by, we are quickly approachin the end of 2012. And while the New Year typically brings a fresh start and a renewed hope and energy, it is important to remember that estate planning is best done before Jan. 1.

Miami-area residents should gift what they can to relatives in 2012 because of the possibility that estate taxes could rise in 2013. With every passing day, that chance grows, and financial planners say that people of a high net worth still have not yet taken advantage of the current tax laws that might disappear come next year.

Here's a reminder of what is at stake if estate plans are not cemented before year's end:

  • People who die before Dec. 31 with an estate of less than $5.1 million will transfer their money with no taxes due from the beneficiaries. The amount above the benchmarked will be assessed at 35 percent tax.
  • Those who want their heirs to not be liable for estate tax can give up that amount, each, without any gift taxes.
  • Couples can give up to $10 million, or $5 million each, to grandchildren or great-grandchildren without a tax.

However, if Congress fails to extend the laws, and if the president doesn't sign such a bill by year's end, each of those exemptions will fall to $1 million. The tax rate will increase to 55 percent and there is no guarantee legislators will take action.

Financial planners said that people of high wealth can give cash to the recipients. If their wealth, however, is held in a business, a stock portfolio or other tangible assets, the owner can move the property into a trust for the recipient to access in the future under the current law.

Time is running short to take advantage of the current tax provisions. People should make an appointment with a financial planner or estate attorney versed in the laws as soon as possible.

Source: MyNewOrleans.com, "Share the Wealth, Escape the Tax," Kathy Finn, September 2012

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