Houston Estate Planning Law Blog
HOW DID THE FISCAL CLIFF AFFECT OUR TAXES FOR 2013?
When talks of the fiscal cliff began, a majority of people across Texas, including just about everyone else in the United States, worried about how the expiration of the Bush-administration tax cuts would affect their earnings in 2013.
For months, Congress has been in a headlock over how best to approach the new budget and with neither side budging, even hours before the ball drop, the world looked on with anticipation to see how it would all turn out.
But in the wee hours of the morning on Jan. 1, Congress and the president came to a tentative decision that could have considerable impacts on how much money a majority of people will see paid out in the upcoming year. This is especially true for those people who may have waited until after the fiscal cliff to do any sort of estate planning.
According to the federal government, taxpayers will continue to pay the current tax rates. However, it’s good to point out that although tax rates will be staying the same, take-home pay will likely be less than anticipated because of the expiration of the 2 percent reduction in Social Security tax.
With a series of other tax rates increasing by about 5 percent across the board, many Americans fear there may not be a silver lining when it comes to the amount of money they will be able to leave their beneficiaries after they pass. The good news may be that the estate tax exemption will continue to remain at $5 million-adjusted for 2013 inflation, of course, to just over $5 million. Even though the estate tax rate will be increased from 35 percent to 40 percent, this will only take affect after a person’s estate has surpassed the $5 million exemption. Though it may appear to be a small silver lining, this may actually be good news for people who expected much worse.
Source: Forbes, “Secrets Of The Fiscal Cliff Deal,” Tony Nitti, Jan. 2, 2013
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ESTATE PLANNING: IMPORTANT TIPS
It takes careful estate planning to ensure that everything is laid out just right for one’s beneficiaries and heirs. A recent article highlighted a few things that women should keep in mind when estate planning; however, the information applies to all Texas estate planners–regardless of gender.
Taxes are an important part of the process. Transfers to one’s spouse may be free of estate tax, but those to other beneficiaries may not be, even to one’s own children. In addition, one would do well to create a will so that after you pass, your loved ones can benefit from knowing exactly how you wanted your assets distributed.
When a will has been made, an executor must be appointed to take care of one’s assets after passing. This person should be someone trustworthy because they will be handling all of the assets and money left behind. The goal is to provide for distribution of assets in the manner desired while seeking to avoid financial issues and other entanglements for your loved ones.
You may also create a trust to provide peace of mind that the individual you want will receive the desired benefit. It is a way to ensure that children receive money that you want left to them, often by including terms that withhold distribution until they reach a certain age. Moreover, it may make sense to take advantage of tax laws concerning annual gifts of money.
One should also make certain that a joint account remains open with their spouse, so that after their passing, access isn’t a legal battle. When that spouse passes away, you’ll have access to all joint accounts. It is also a good time, after a spouse passes away, to re-evaluate your estate plan. As life changes, your plan may evolve.
Many haven’t given estate planning much thought. However, it is a crucial part of life for women and men alike. With a well thought out estate plan, you can rest assured that your final wishes will be carried out the way that you always wanted and that each heir receives their rightful share of your estate.
Source: San Francisco Chronicle, “10 Estate Planning Tips For Women,” Angie Mohr, July 25, 2012
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