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A good year for gifting in Florida estate plans

Our readers in West Palm Beach may benefit this year from a professional review of their estate plans. In light of uncertainties about the future of the federal gift tax exemption, waiting until next year to polish up estate planning goals could result in unnecessary tax liabilities.

With the gift tax exemption scheduled to drop from $5.12 million to $1 million at year's end, Floridians may want to consider taking time this year to maximize family gifts. One simple way to accomplish that goal consists of reviewing and equalizing gifts among family members up to the limits of the gift tax exemption. Other means of benefiting from the gift tax exemption include parceling out discounted business interests and forgiving loans made for purposes such as college funding. Grantors concerned about retaining adequate retirement income may also want to consider the merits of certain types of trusts.

Limited business interests may be gifted at a discounted valuation rate. The discount provides a mechanism to efficiently reduce estate assets while recognizing potential tax advantages. Both the gift tax exemption and the valuation discount stand to change in the coming year.

Family loan forgiveness can realize value from the gift tax exemption without tapping into cash on hand. Certain formalities need to be observed in order to enjoy the advantages of loan forgiveness, so persons considering loan forgiveness may benefit from professional assistance.

Irrevocable trusts offer another mechanism for reducing estate assets while retaining income from trust assets. A properly tailored trust can provide ongoing retirement income and can be crafted to provide additional income for a surviving spouse in the event of a change in financial conditions.

Regular review of one's estate plan can help ensure that it adapts to maintain estate planning goals under frequently changing law. With significant legal changes looming on the near horizon, Floridians would do well to update their estate plans now in order to avoid missing out on opportunities that may not be available in the future.

Source: The Wall Street Journal, "A Golden Age of Gift Giving," Kelly Greene, May 25, 2012

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