Estate planning should be focused on anticipating possible outcomes and structuring your affairs for the tax-efficient disposition of your assets to your loved ones. However, all too frequently we estate-planning practitioners find ourselves working with clients in a reactive situation, trying to salvage an acceptable outcome out of some missed opportunity. Obviously, better outcomes are achieved when planning, rather than when reacting.
Careful attention should be paid to your retirement plan and life insurance beneficiary designations. Effective planning can ensure that these assets are directed to your beneficiaries in a way that takes advantage of all available tax benefits. Unfortunately, when proper planning is not done, opportunities to reactively salvage some benefit are few and far between.
The current environment of low interest rates and the high gift-tax exemption makes 2012 an ideal time to make gifts to or for the benefit of loved ones. The opportunity is fading fast, however, as the gift-tax exemption will revert to $1 million after this year. The smart play now is to discuss these opportunities with your estate planner, as the prevailing wisdom is that the $5 million exemption won’t return in 2013.
Finally, you cannot assume that you don’t need a will or don’t need to update your will. There are many faulty assumptions in the field of estates and trusts, and they can all be easily corrected with a quick phone call. Assuming that your ten-year old will is still appropriate and effective, though, can lead to unintended consequences.
In 2012, there are opportunities to plan. Unfortunately, too many individuals miss the opportunities and are forced into salvage missions. Be a planner!
