Estate Tax Changes for 2014

Typically, new amendments or laws regarding estate planning will start at the beginning of the year, and 2014 will be no different with regard to some changes in estate planning. One of the biggest changes hitting the landscape is that as of January 1st, individuals are able to pass on an additional $90,000 free of the federal estate tax to others during their life and at death. Since this is such a dramatic change, it's worth a call to your estate planning attorney to talk about how this might alter your existing plans for the upcoming year.

estate tax changes IMAGEWhat's behind the change? It's a lot more practical to give individuals the opportunity to give gifts during their life or at death at this new higher limit without having to worry about the estate tax. Previously, the exclusion amount was capped at $5,250,000, but now each personal obtains a "Credit" to offset estate taxes on amounts up to $5.34 million.

Also new for the upcoming year is an increase for the generation-skipping transfer tax exemption (up to the same $5.34 million as mentioned above) and the increase to the annual exclusion for gifts to non-citizen spouses (from $143,000 to $145,000). A minor increase to the foreign earned income exclusion is also being put into place, from $97,600 to $99,200. The gift tax, however, will stay the same, allowing each person to gift up to $14,000 without any tax ramifications.

Reading through these changes should get you thinking about whether you're affected by any of the updates to the law. Estate planning can be a confusing process, but it's much easier when you have the guidance of a trained professional. It's a great time of year to set up an appointment to bring in your existing documents for review and to consider whether any updates are required. If you're ready to get organized for 2014, contact a Wheaton estate planning lawyer today.


Different Kinds of Trusts and Their Uses

If you have property or assets that you want to leave to your heirs, then you have several options.  A trust can shield these assets from taxation and also probate.  It allows you to protect your legacy and control your wealth.  They are essential to good estate planning so it is important to know what they can do.

There are two types of trusts.  The first is a living trust, which is called that because it is active during the grantors lifetime.  A living trust can either be revocable or irrevocable.  A revocable trust can be changed at any time in the grantor's lifetime.  If a relationship, circumstances or your intentions change then it is not an issue.  But while it does avoid probate, a revocable trust is subject to estate taxes.

An irrevocable trust is the opposite.  It immediately transfers your effects out of your estate and into a separate legal entity. There is no way to change your mind or use these assets because they are not yours anymore.  Benefits of an irrevocable trust is that it can avoid probate and estate taxes.

The other type of trust is called a testamentary trust.  These kind are specified in a will document and only created after the grantor has died. The funds can be subject to probate and estate taxes but can accomplish a variety of goals.

One example is a bypass or credit shelter trust which can protect your estate from taxation.  It allows the transfer of the most money allowed without being subject to taxation and then moves the rest to your spouse completely tax free, even if the estate grows.  Another example is a generation-skipping or dynasty trust.  It allows the transfer of a sizable amount of assets tax-free to beneficiaries that are at least two generations removed, such as grandchildren.

If you are interested in leaving the most assets to your heirs, then you should consider setting up a trust.  Contact an experienced estate planning attorney in DuPage County who can suggest the best trust for your given situation.

An Estate Planning To-do List

Since the holidays are right around the corner, there are some things that you should start to consider for planning your estate. One reason to plan now is that laws will change on January 1, 2014, and certain trusts can allow you to leave assets to your loved ones without being lessened by taxes. To make the most of your hard work, make sure you take the time to complete your estate plan.

Starting in 2014, the federal tax free limit that people can transfer to successors will increase. The gift tax will is also set to increase. There are also many different tax breaks or exclusions that will change beginning next year. This is a good time to begin or review your personal estate plan with a checklist.

It is important to elect someone who will act in your best interest if you are unable to. If your health could be an issue in the future, nominate someone to have health care power of attorney and amend your living will, which will provide them with a guide. You can also elect a financial power of attorney, a guardian for any minor children and an executor of your last wishes.

Estate planning is the time to write down how you want your assets to be passed on to your loved ones. Your spouse might want to sit in with you as they will be one of your main concerns in this process. If you have any current documentation that controls your estate, this is a good chance to review it and make changes as you see fit.

If you have identified your main goals in your estate plan, it is time to seek a professional. It is important to have the expertise of someone who can translate your desires into a combination of trusts and scheduled gifting that will allow your estate to be transferred with a minimal taxed amount. An attorney can make sure that all documents are legally sound, and there will not be any hiccups when it it is too late for you to make changes. Contact an experienced estate planning attorney in DuPage County today.