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Thursday, July 12, 2012

Considering the Heirs

In his recent article in the New York Times, Paul Sullivan writes about the current tax break that allows individuals to give up to $5.12 million to their heirs tax-free.  The fate of this current break, set to expire in nearly five months at the end of 2012, may not be determined until after the November election.  In the meantime, individuals have a "once-in-a-lifetime opportunity" to transfer their assets in trust to their children and other loved ones without leaving them a hefty tax bill.  As Paul writes, the issue for some is giving up control and trusting they have enough liquid assets to live on should their financial circumstances change:

Now, some of the wealthy are faced with a choice that seems designed by a behavioral economist to test rational decision-making: Do they give their heirs the full amount of the exemption, happy that the money will help the heirs now and reduce their eventual estate tax bill? Or do they give less, or none at all, for fear that they could be left with not enough to live on?

One option for individuals worried about retaining their liquid assets is to put real estate or shares in a private business into a trust.  While no one can predict with certainty what the estate laws will look like in January, one thing is clear:  You should sit down with an estate planning attorney to assess your concerns and consider taking advantage of this opportunity soon, before the law expires.  

Check out Paul's entire article here.



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