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Should You Review Your 2012 End of Year Estate Planning?

The end of 2012 was filled with legislative and fiscal uncertainty. Amid the fiscal cliff discussions loomed year end changes in federal tax laws and the lingering effects of those changes on estate planning for coming years. Specifically, many were concerned about the gift and estate tax exemption expiration, and this created a mad rush for many to quickly draft and execute wealth transfers. But, now that the dust has somewhat settled, should you go back and review those 2012 transfers? It may be a good idea.

What Happened at the End of 2012
The lifetime gift tax exemption of $5.12 million with a rate of 35% was in effect until the end of 2012 . However, many worried that starting in 2013 the lifetime gift tax exemption would go down to $1 million dollars with a rate increasing to 55%. As the change loomed at the end of 2012, many individuals in the last part of the year scrambled to take advantage of the higher gift tax exemption before its expiration. Many transferred wealth to children in order to avoid losing large chunks of it to Uncle Sam in later years.

However, as most know, the worst case scenario did not take place. Instead, Congress and the White House agreed on a compromise which will seemingly lock in the favorable gift and estate tax rates for the indefinite future. The current exemption level is $5.25 million (pegged for inflation) with a 40% top rate.

Why Revisiting Those Hasty 2012 Transfers Might be Worthwhile
The rush to transfer wealth at the end of the year often meant that the exact method of transfer was not ideal. For one thing, even if the tax and legal aspect of the transfer was appropriate, there may have been unintended family implications for the transfer. After all, large asset transfers to children usually require careful family consultation and understandings. In the year-end rush, some of that was forgotten.

As discussed in a recent Wealth Management article, because many of those last minute transfers were not done with communication and collaboration in the forefront, it could be worthwhile to review the transfer documents and see if possible changes could make the transitions better overall.

Talk it Over With Professionals

If some of your last minute wealth transfers involved substantial gifts to your children or grandchildren, it may be worthwhile to talk to professionals about any of your questions, before you talk to your children. Often, many of the choices made regarding the transfer of assets will ultimately impact children and/or grandchildren.

As an example, a Merrill Lynch article explains how many of those last minute gift transfers were done though different types of trusts. It could be worthwhile, if you are having second thoughts about some of your last minute 2012 decisions, to bring in your documents for review to see if possible changes could be made. Reviewing documents that were prepared in the midst of an upcoming deadline could lead to possible modifications that are better tailored to your ideal estate planning wishes.

For help in San Diego or surrounding communities with these issues, please visit the Law Office of Scott C. Soady.

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