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Reviewing Estate Plans in Scottsdale

Recent Changes to Estate Tax Laws

The American Taxpayer Relief Act of 2012 was approved by Congress on January 1, 2013, and signed by the President on January 2, 2013. This legislation, also referred from time to time as the "Fiscal Cliff" bill, retains the $5 M per person federal estate tax exemption for U.S. citizens and foreign citizens domiciled in the U.S., adjusted for inflation. For example, the IRS has announced that for decedents dying in 2013, the exemption amount (i.e. the amount of assets exempt from federal estate tax upon death) will be $5,250,000 per person. However, the top federal estate tax rate has increased from 35% to 40%.

This law brings stability to an area of law which for years has been fraught with uncertainty. In addition to making the $5 M exemption permanent, the new law makes permanent the portability of any unused portion of the deceased spouse's exemption to the surviving spouse. For example, if the estate of the first spouse to die is $4 M, and if the Personal Representative of the deceased spouse's estate makes an election on a timely filed estate tax return, the unused exemption amount (in this case $1 M) will "port" (i.e. transfer) to the surviving spouse. Such an election can be beneficial, as it will effectively increase the surviving spouse's exemption from $5 M to $6 M, thus allowing additional wealth to pass to family members free of estate tax. However, portability can only be accomplished if an estate tax return is timely filed. Portability is yet another reason to consult with a Scottsdale tax planning attorney soon after the death of a married spouse.

Updates on Gift Tax

The other good news is that the gift tax annual exclusion amount (the amount each person may annually gift to a non-charitable recipient) has increased from $13,000 per recipient to $14,000 per recipient for gifts made in 2013. For example, a married couple with two children could each make gifts valued at $14,000 to each child, effectively transferring $56,000 of wealth out of their taxable estate without the imposition of any income tax or gift tax on the gifts. Annual exclusion gifts for minor children can be made to an irrevocable trust and invested for their future benefit.

If you have been waiting for certainty in the estate tax laws before revisiting your existing estate plan, now is an excellent time to hire Grant McKeehan to review your wills and trusts. He can take into consideration the current value of your assets in light of the recently established estate tax exemptions. A fresh look at old estate plan documents could present valuable opportunities to minimize the potential erosion of your estate due to taxes, better ensure that your estate will not require probate and to make any appropriate revisions related to recent changes in your family, personal life or finances.

If you are searching for a lawyer to look over your estate plan, contact a Scottsdale estate planning attorney from Grant N. McKeehan, PLC today to have your plan reviewed.

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Grant N. McKeehan, PLC - Scottsdale Estate Planning Attorney
Located at 4300 North Miller Road, Suite 220 Scottsdale, AZ 85251. View Map
Phone: (888) 913-8943 | Local Phone: (602) 791-6174.