What is a disclaimer?

A disclaimer is a refusal to accept property that one would otherwise receive by gift or inheritance. These days the disclaimer is receiving much more attention from estate planners for its usefulness in adjusting estate plans after death when needed.

Disclaimers are a way of changing the distribution from a Will if there is a tax benefit or other reason to do so. For example, Grandpa leaves his estate to his Daughter who is already wealthy. Daughter disclaims the inheritance and allows it to go instead to her children who need the money to pay college tuitions for their children.  [Read more…]

What now? Uncertainty in the estate planning world.

As you may know, under current law, there will be no federal estate tax assessed against the estates of those who die in 2010. However, the federal estate tax will be reinstated with a $1 million exemption and a 45% tax rate on January 1, 2011. Many thought that Congress would have acted by now to set a higher exemption for the estate tax for 2010 and beyond, but so far no action has been taken. If Congress does act this year, whatever changes they enact may be retroactive to January 1st.

How does this affect the average person who already has a Will or Trust in place? It depends. For those with simple Wills and no tax planning, there will be no problem. There is more cause for concern if you have documents that include tax planning language that divides estate assets by referring to estate tax credits and exemptions. Most of these credits and exemptions do not exist for those who die in 2010. It is unclear what will happen if someone dies in 2010 with this type of language in their Will or trust. However, it is certain that in some situations, there will be undesirable results.  [Read more…]

Gift-giving as a means of estate planning

We have all heard the saying that it is better to give than to receive. This is especially true if you are a wealthy person who wants to minimize estate taxes. Giving away money or investment assets, whether to charities or to family members, reduces the size of your estate and therefore reduces the amount of estate and inheritance taxes that your estate will pay later.

The advantage of giving gifts during life is that you get the pleasure of seeing your loved ones enjoy the gift. It is a relatively low cost means of reducing your estate and can be as simple as writing a check. You don’t have to pay an estate planning lawyer to help you do it. However, you should get some initial guidance from an accountant or estate planning attorney on the laws covering these types of gifts so that you don’t inadvertently run up a big gift tax liability. Gift taxes are paid by the donor, not by the recipient of the gift.  [Read more…]