September 23, 2013 –
Family Wealth Compass – September 2013

Love and marriage after DOMA

For federal purposes, all marriages, same sex or opposite sex, are now treated equally. This means that federal benefits afforded opposite sex married couples are now available to same sex married couples. In the estate planning arena, such benefits include, but are not limited to:

1. claiming the marital deduction for gift and estate tax purposes;
2. electing portability of the deceased spouse’s unused applicable exclusion amount;
3. splitting of gifts to third parties for annual exclusion purposes;
4. naming the spouse as the beneficiary under a qualified retirement account and allowing the spouse to “roll over” the account;
5. filing joint income tax returns;
6. simplifying the basis and contribution rules with respect to jointly owned property;
7. eliminating adverse tax consequences for the transfer of property pursuant to a marriage settlement agreement; and
8. granting certain Social Security, Medicare and Medicaid benefits.

The above benefits can result in greater tax savings for same sex couples and an extension of government programs to them prospectively and, in limited case, retroactively.

How a relationship will be treated under state and federal law is an important part of estate planning. Whether it is a same-sex or opposite-sex relationship or marriage, there are planning strategies and techniques available to help protect loved ones.

Read the entire article: Love and marriage after DOMA (Family Wealth Compass, September 2013)

Portability

The portability provision of the American Taxpayer Relief Act of 2012 may be helpful to those who have not done proper planning, but it will not replace many of the benefits of using credit shelter trusts (trusts that take advantage of the applicable exclusion amount) as part of your estate plan. However, in some situations (especially for families with less than $10 million), portability may be preferable to a credit shelter trust because of the ability to benefit from an additional basis step-up at the death of the surviving spouse.

Read the entire article: Portability (Family Wealth Compass, September 2013)

The new Medicare surtax

With all the talk about new legislation to avert the fiscal cliff, you may have missed an important change to the Medicare tax that will impact upper income taxpayers.
In addition, there are a number of ways to plan around the 3.8% surtax.

Read the entire article: How does the new 3.8 percent Medicare surtax impact you? (Family Wealth Compass, September 2013)

Fiscal Cliff (revisited)

The 2012 Act prevented a significant portion of the “Bush Tax Cuts” from expiring, while raising tax rates on higher-income taxpayers for both income and estate and gift tax purposes. So what is the practical effect?
The 2012 Act makes the following permanent:

1. income tax rates and brackets (subject to inflation adjustments);
2. the inflation indexing for the alternative minimum tax; and
3. the overall structure for estate, gift and generation-skipping transfer taxes.

What does “permanent” mean? Congress can still enact changes to the tax law, but the 2012 Act provides that the major provisions setting forth tax rates are “permanent” in the sense that they will not automatically expire.

Read the entire article: The other side of the fiscal cliff (revisited) (Family Wealth Compass, September 2013)