Estate Tax Planning Proposal

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Estate Tax Planning Current law for estate tax, gift tax, and generation skipping transfer tax is a 35% rate with an exclusion of $5.12 million. This is scheduled to change on January 1, 2013 to a 55% tax rate with an exclusion of $1 million. Due to the scheduled change, it would be advisable to be very aggressive in tax maximization before December 31, 2012. Pending congressional action, there is a proposal to for a 45% tax rate with an exclusion of $3.5 million for estate and generation skipping transfer tax and an exclusion of $1 million for gift tax (General Explanation of the Administration's fiscal Year 2013 Revenue Proposals, 2012). This proposal is more viable because it gives a greater exclusion on the estate tax. Even though the tax rate is higher and the exclusion is lower, it would provide more tax breaks than the scheduled change because the exclusion is $2.5 million higher. There are two ways of transferring wealth to children and maximizing the estate taxes. For the year of 2012, a total of $13,000 a year can be given to an individual, $26,000 if married without paying taxes (Get ahead of your estate planning). For the year of 2013, the amount will be $14,000 per individual with no restrictions on who the gifts are given to or how many recipients the gifts are given to (Estate Planning: Transferring Wealth and Tax Planning). There is also the ability to pay medical and education expenses for someone to the respective institutions. Certain trust funds
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