4 Estate and Tax Planning Steps to Take in an Uncertain Year

Regardless of whether Congress acts on taxes by year-end, estate planning attorney John Scroggin says taxpayers shouldn’t dally

Reposted from AdvisorOne.com | By Michael S. Fischer, AdvisorOne

Planners will not know before year-end what changes on the tax front are in the works for 2013, according to John Scroggin, a business, tax and estate planning attorney and a popular speaker at advisor conferences based in Roswell, Ga. A last-minute deal in a post-election lame duck session of Congress, similar to the one in 2010, is highly unlikely.

That means planning this year will have to take place in a vacuum, Scroggin told AdvisorOne in a recent phone interview.

John ScrogginScroggin (right) said affluent people, defined as those with upward of $3 million in assets, should discuss with their advisors whether estate planning is necessary in 2012, and consult with a qualified expert in estate and income taxes before implementing any major tax planning this year. “Waiting to year-end is stupid in this environment,” he said.

Given the parlous planning environment this year, he offered the following suggestions:

  1. The estate and gift tax exemptions drop from $5 million per taxpayer in 2012 to $1 million in 2013. People with estates above $5 million to $10 million should consider making significant gifts in 2012 in order to reduce the future estate tax cost of bequests when the exemption is lower and the tax rate is higher. Although Congress may increase the exemptions in 2013, there is no assurance that will happen and if it does happen what the exemptions will be. Effectively, you will be forced to “plan for the worst and hope for the best,” he said.
  2. The federal dividend rate of 15% will expire at year-end. Anyone holding significant cash in a C-Corporation should consider taking a dividend of the cash out before year-end. If needed, the funds could be loaned back to the C-Corporation.
  3. The federal capital gain rate increases from 15% to 20% in 2013. If you are anticipating an imminent capital gain transaction, consider completing the transaction before year-end. If a transaction in 2012 has any deferred payments, consider assuming the entire tax burden in 2012, rather than opting to pay taxes as the funds are received.
  4. A client whose longevity beyond 2012 is in question (because of terminal illness or old age, for example) should consider having a general power of attorney in place, with the power holder having broad authority to make gifts and/or advance bequests.


Yesterday, we held a teleconference with estate planning attorney and CPA, Martin M. Shenkman on the topic of, “Recent Developments in Estate Planning: Special Traps and Tips to Avoid Them“. According to attendees, this was an excellent program to cover a variety of tax planning ideas for this year. You can still purchase the handout materials and the audio recording to this program.

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