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August 30, 2012 at 12:00 PM
With only four months remaining in 2012, wealth managers should make a point to talk with their affluent clients about wealth transfer plans. The current federal estate, gift, and generation-skipping transfer (GST) tax rules are set to expire at the end of 2012, and the upcoming presidential election has done nothing to improve clarity regarding the future of these rules. The top rate today is 35%, with an exemption of $5.12 million per individual; absent legislative action before the end of the year, the top tax rate will increase to 55% and the exemption will decrease to $1 million on January 1, 2013. At this point, all we can do is act upon what we know.
The scheduled expiration of current tax rates and exemption amounts will expose many more individuals and families to estate, gift and GST tax liability. Granted, this may be exactly the plan, given the enormous deficit being carried by the federal government. Regardless of political allegiance, most agree that raising revenue through taxation will have to be some part of the solution to the country’s ever-growing budget woes.
Faced with these pending changes, wealth managers should encourage their clients to take advantage of the unprecedented opportunity to transfer wealth out of their taxable estates at little or no cost. (Clients who take a wait-and-see approach may be in for an unpleasant surprise in 2013.) Because most wealth transfer strategies require time to develop and implement, however, it is of utmost importance that clients take action now.
