Advanced Planning Techniques To Be Targeted?

The Obama administration took aim at a bunch of old standbys and some new targets in its 2013 budget issued last February. Nothing became of it in the New Year’s day tax package–much to the relief of rich folks and their financial advisors. But we can expect renewed interest as the legislators tackle part two of the fiscal cliff crisis: cutting spending and raising revenue.

With the fiscal cliff standoff behind us, many Americans are content to rest and catch up on their sleep. Some professionals, however, have started to realize that there were some very real questions left on the fiscal cliff table. That’s right – we are approaching a renewed fiscal debate and inevitable revenue-squeezing.

While significant estate planning laws are settled, there remain more than a few important estate planning “tools” left hanging in the air. These tools likely will be low-hanging fruit in future discussions.

The American Taxpayer Relief Tax Act Of 2012 (ATRA) finally ended some 12 years of estate planning uncertainty (or so we can only hope). The certainty includes such matters as various tax rates and the exemptions amounts for the estate tax, gift tax, and generation-skipping tax. But ATRA didn’t settle many technical questions raised in the past few years, both on and off the campaign trail.

So, what issues and devices should we watch? A recent Forbes article titled “Congress May Tighten The Belt On Cute Tax Tricks” lists some sore subjects and possible new areas of taxation. These include:

• Grantor Trusts: might just get added back into the Grantor’s estate.
• Dynasty Trusts: might just limit the extent of your dynasty.
• GRATs: “Grantor Retained Annuity Trusts” (GRATs) might become much more demanding and risky.
• Family Limited Partnerships: might become much less valuable as your ability to take discounts is curtailed.

The original article is worth your time, especially if you are concerned that future technical rules may swoop in and sully some well-designed estate planning. However, for those conversant with this subject, they will recognize that this talk is nothing new and these estate planning devices have been repeatedly targeted in the past.

The takeaway, as always, is to consult qualified legal counsel regarding how future changes in the law may impact your estate planning.

Reference: Forbes (January 16, 2013) “Congress May Tighten The Belt On Cute Tax Tricks”