Archive for the ‘Estate Taxes’ Category

On Estate & Succession Planning

Monday, May 19th, 2014

Setting up an estate plan can be challenging. There are many legal factors involved such as double taxation, and not having a good handle on such matters can compromise the transfer of your wealth. To make sure that you keep what you have earned, take a look at the following things you should know about estate and succession planning:

Gifting to Heirs

The estate tax trap is generally geared towards the extremely affluent individuals. Those who are considered middle-class, however, can also be subject to estate tax. This can be a huge burden, especially if with the high taxation rate. One strategy you can do is to give the maximum amount to as many recipients as possible. This may reduce the estate tax you may be liable to pay.

“It’s just for the Rich” and Other Estate Planning Myths

Wednesday, February 26th, 2014

Simply put, estate planning is one way to leave instructions with regard to caring for all your assets in case you become incapacitated due to an illness, or if you unfortunately meet your demise. This includes a lot of legal instruments.

The legal nature and complexity of estate planning led majority of Americans to believe that estate planning is only for those who can afford it: the rich and the A-Listers. Below are other misconceptions you need to ward off before they prevent you from making one of biggest and most important decisions of your life. (more…)

Estate and Gift Planning for 2012

Tuesday, April 24th, 2012

By: Jared Ripplinger, CPA, MBA, CFP®

For several years now there has been a great deal of uncertainty regarding the estate tax law, and what will happen in the next several years.  The following is a brief synopsis of the variability in the estate tax law over the past few years, as well as some opportunities that exist during the remainder of 2012.

Gift Tax is assessed against lifetime transfers of assets in excess of the annual exclusion amount.  The annual exclusion is currently $13,000 per donor per donee, and is available each year.  The donee’s don’t have to be related to the donor in order for the gift to qualify for the annual exclusion, but the gifts do have to be a gift of a present interest in the property.  A future interest in property does not qualify for the gift tax annual exclusion.

The Estate Tax is assessed by the federal government and some state governments, against the value of assets transferring at the death of an individual (the decedent).

Technically, there is no estate tax exemption, but there is a credit against estate tax, which effectively exempts a certain amount of assets transferring at death to the decedent’s heirs.  For simplicity we will refer to this as the exemption equivalent.

Prior to 2001 the unified credit was large enough to equate to an exemption equivalent of $600,000 in 1997 to a projected estate/gift exemption equivalent of $1 Million in 2006.  In May, 2001 EGGTRA was passed, accelerating the $1 Million exemption equivalent to be effective as of that date, and scheduling an increasing exemption equivalent amount over the next several years.

We saw the exemption equivalent for estate tax increase to $1.5 Million in 2004, then to $2 Million in 2006, followed by $3.5 Million in 2009.  In 2010 the estate tax was repealed for most of the year, until congress passed a retroactive estate tax in December, 2010, combined with a $5 Million exemption equivalent.  From 2004 through 2010 the gift tax exemption remained capped at $1 Million, but in 2011 the $5 Million exemption equivalent once again applied to both gift and estate taxes.  That $5 Million exemption equivalent has been adjusted for inflation to $5,120,000 for 2012, which opens up some estate and gift planning opportunities.

Note that the unified credit (exemption equivalent) is scheduled to sunset (or expire) after 2012, which would result in the return of the $1 Million exemption for both gift and estate taxes, unless congress passes an extension of the law, or a new law to prevent the sunset of the 2001 estate tax law, with its subsequent modifications.

With that background, some opportunities that exist in 2012 include the following:

- Maximize the usage of annual exclusion gifting ($13,000 per donor per donee)

- Consider using some or all of the credit against gift taxes to reduce the size of the estate, or to utilize the credit while it is at its historically highest level.

- Beware of potential pitfalls in making gifts or bequests to grandchildren or other “skip persons”.  There is another tax that may apply to generation-skipping gifts/bequests (not addressed in this blog post).

- Consult your CPA and your estate attorney to make sure your estate plans and documents are up to date and are structured to handle the unknown variables in the estate planning area.

As with anything estate planning related, each individual case can vary greatly from the next individual’s case, so make sure you meet with an estate planner who is familiar with all aspects of estate planning, and is up on the latest tax law and developments.  Also keep in mind that a lot, if not most, of estate planning isn’t even directly tax related.  In looking at estate tax reduction strategies, don’t let the tax purpose of a strategy undermine your ultimate estate plan, or non-tax purposes for estate planning.

Death and Taxes…Are they still certain? A brief glimpse into the future of the estate tax in 2010

Friday, January 15th, 2010

Authored by Travis Landry, MAcc. Travis graduated from the University of Utah with a Masters of Accounting with an emphasis in taxation. Travis works in the Salt Lake office of CMP. Travis specializes in business and individual taxation, estate taxation and tax research.

Benjamin Franklin is known for his famous saying that “in this world nothing is certain but death and taxes.” I couldn’t agree more. However, this year we come across a peculiar point in time where death and taxes(together) might not be so certain. I will take the next few lines to discuss what is happening with estate tax and why it causes us to be so uncertain of “death and taxes” in 2010. Before I continue, let me mention that before making any estate planning decisions please consult with one of our tax professionals at CMP.


Early in American history the federal government relied heavily on taxes/levies to help alleviate temporary national emergencies. However, in 1916 the federal government had more permanent issues to deal with and they enacted the estate tax as well as the income tax. Almost two decades later, the government noticed a lot of wealthy people avoiding the estate tax, simply gifting the money or assets to their heirs before they died. Hence, the gift tax was created.

The Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA)

The EGTRRA was signed by President George W. Bush in June of 2001 as part of a plan to cut taxes by $1.35 trillion. The tax cut was to take place over the next 10 years and gradually reduce the highest estate, generation-skipping, and gift tax rates. Aside from reducing the tax rates, EGTRRA also gradually increased the applicable exclusion amount. In 2009, the highest estate tax rate had been reduced to 45% and the maximum exclusion increased to $3.5 million. The biggest provision from the EGTRRA was to take effect in 2010 when the estate tax would be repealed (no estate “death” taxes).


Ever since EGTRRA passed, jokes have been flying around about killing off the wealthy in 2010. The deaths of the Warren Buffets and the Bill Gates of the world are not the biggest issues that EGTRRA brings up. Government wants to spend more money. If EGTRRA stands, the federal government will be forfeiting hundreds of millions if not billions of dollars in tax revenue. Obviously, Congress is fully aware of the consequences to their spending plans should the 2010 EGTRRA provisions go through. However, most of Capitol Hill isn’t as focused on the death tax as they are with healthcare reform.

What if Congress does nothing and estate taxes really are repealed?

However unlikely the case, if Congress doesn’t act there will be no estate taxes at all, right? Wrong. We can’t forget about state death taxes (in those states that have an estate tax). Even if nothing happens with Congress, in 2011 the pre-EGTRRA levels will return. This means that estates will be taxed at a maximum of 55% and can only exclude $1 million.

What we think will happen

Already passed on December 3, 2009 was a bill by the House that permanently extends the 2009 EGTRRA provisions (45% estate tax rate, $3.5 million per person exclusion). This came as a surprise bill since it passed as a permanent change rather than a one-year extension. Nevertheless, shortly after the bill passed, it was shot down by the Senate. The Democrats were all for the House’s bill but the Republicans were not. The Republicans sought to lower the rate even more to 35% and allow individuals to exclude even more ($5 million). We expect Congress to settle on a bill soon; and when they do, the law will be applied retroactively to be sure and hit those rich millionaires who died after January 1, 2010. Unfortunately for them, they probably died happy, thinking they defied the great Ben Franklin.


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