Estate Tax Changes: Reasons to Review Your Plan

Jan 03, 2014 at 12:03 pm by steve

There have been significant changes to the Estate and Gift Tax Law over the past few years. For 2014, the amount which can be left tax-free to heirs other than a U. S. citizen surviving spouse has risen to $5,340,000, and a new rule known as "portability" allows taxpayers a chance to claim their deceased spouse's unused tax-free amount. These amounts compare to $1,000,000 tax-free transfers for deaths occurring just a few years ago.

The law is relatively new, and many of the provisions of estate taxes, gift taxes and generation skipping transfer taxes are more "permanent" in nature than in old law. Therefore, it should be the reason to make or update your estate plan, because the consequences of not having an estate plan, or having an outdated estate plan, are simply too great. Planning for estate taxes is only one small piece of the process, and estate plans can be made flexible enough to change as your life and the laws change.

This has many financial and estate planners discussing the need to review existing Wills and Trusts to determine if they still meet desired needs and objectives.  

Where do you begin?

First, locate your existing documents - Wills, Power of Attorney, Health Care Directives and any other documents important to you, such as employer stock Buy-Sell Agreement. Study the documents to determine if the provisions are valid today based on your situation. Determine if those named in the documents as Personal Representatives (Executor), Trustees, Agents, Beneficiaries and Charities are appropriate for your current needs. Review all of your specific bequests to determine if they are still appropriate.

Second, make notes of any changes you want to make in the documents. I suggest you focus on what you want to happen to your assets, and to whom you want to leave the assets. Be sure to think about the unlikely event that none of the named beneficiaries survive you, so choose those alternate individuals or charities to receive funds in this rare situation.

Third, determine if there are any special needs that should be addressed in the planning process.  These needs could include charities you want to remember in your planning giving; or family members and others who will need special financial consideration due to their situation. These needs could be special monetary needs or a need to leave the inheritance in a long term trust with professional management.

Fourth, consider your business and how much time you have allocated to succession planning.  Succession planning includes having a management plan to keep the business viable if key personnel are unable to work, and a plan to create capital for future needs if an owner dies. The need could be family income needs or tax needs if the estate plan includes non-spouse beneficiaries and the taxable estate is in excess of $5,340,000.

Fifth, confirm the ownership and amounts in all investment accounts. Obtain current life insurance information, including type of coverage, amount of coverage and confirm the policy owner and beneficiary. It's a good time to call you insurance agent and review the policies you have in force to make sure the type of coverage and amount of coverage are adequate for your current needs. In addition, you should review all retirement plan and Individual Retirement Accounts and annuities in a similar manner.

All of this information will provide a good summary of your current planning. Review your summary to determine if you want to make changes in how you disburse your estate or whom you want to assist in the administrative aspects of the estate.

Since many Wills and other documents have not been revised in many years, consider meeting with your financial advisors and attorney to review the monetary aspects of your planning, and to review the legal aspects. Many tax cases and law changes have affected documents in force. So, even if there are no substantive changes to the "plan" there could be a need to update the actual documents. An example is the Alabama Power of Attorney Act which became effective on January 1, 2012.  

So, what are some of the key considerations in the planning process? While considerations are personal in nature, some to be aware of are:
  • Who do you want to receive your assets
  • Personal net worth, including taxable life insurance
  • Current living needs
  • Life expectancy
  • Desire to give assets away during lifetime
There are many specific estate and gift planning opportunities and tax techniques that are more complex in nature and are not addressed here. Each situation is different. Your circumstances should be reviewed with your advisors. It is early in 2014 - a great time to work on this important topic. Why not make it a first quarter 2014 goal?

© 2013 L. Paul Kassouf & Co., P. C.

Gerard J. Kassouf, CPA is a director of the Birmingham, Alabama firm of L. Paul Kassouf & Co., P. C., Certified Public Accountants and Business Advisors.  He can be reached at

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