Under the new rules, a taxpayer may shield
up to $5.25 million from estate taxes ($10.5 million for couples) …
Now that the uncertainty has been
lifted, some ultrawealthy families are wondering whether they want to leave
heirs that much tax-free money after all.
Can you really ever have too much of a good
thing? When it comes to the estate and gift tax exemption amount, many heirs
would be thrilled when $5.25 million is up for grabs. How could that be too
much of a good thing? But parents have a different answer; some believe that $5.25
million is just way too much of a good thing to leave as inheritance to their
children.
None other than the venerable Wall Street Journal explored this subject in
an article appropriately titled “Can
You Trust Your Kid With $5.25 Million?”
As you likely are well aware by now, the recently enacted American
Taxpayer Relief Act of 2012 (ATRA) sets the unified estate and gift tax
exemption at $5.25 million per taxpayer (with a nearly “automatic” $10.5
million per married couple). Using certain estate planning “tools” (e.g., to
make “discounted” wealth transfers) you can do a great deal better than that,
too.
So, what do you think about leaving a large inheritance to your
progeny? By default in most jurisdictions, your children would inherit their
inheritance outright without any restrictions, guidance or protection at age 18
(or immediately if already older than age 18). If that is not enough motivation
to make proper estate plans now, then little may do the trick.
Proper estate planning means providing the legal means to both protect
the inheritance “for” and “from” your descendants. Have you ever noticed that
some children “grow up” and others just “get older”? Accordingly, your planning
should reflect the unique needs of each of your children. While you are at it,
perhaps you might want to make provisions directly for your grandchildren. Many
grandparents say had they known how much fun grandchildren are, they would have
had them first!
When you make financial arrangements for your heirs, be prudent in your
decision so that the inheritance is a blessing and not a curse. And don’t
forget to leave an inheritance to your favorite charity or charities, as well.
For more information and articles on
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Reference: The Wall Street
Journal (January 18, 2013) “Can You Trust Your Kid With $5.25 Million?”