When Congress recently enacted changes to the estate tax, many Lee County residents jumped for joy upon learning that they could safeguard up to $5.25 million ($10.5 million for couples) from estate taxes. That 35 percent hike over last year's exemption was for many higher than had been expected.
But for some, the joy quickly gave way to concerns about giving their heirs such a large amount of tax-free money. Would it kill the motivation for the next generation to be as successful as the present one?
When a large national bank's wealth-management division recently surveyed people with $3 million or more in assets, they found that many said their children aren't prepared to inherit the wealth they're due to receive.
One possible solution for parents in that position: a "silent" or "quiet" trust, in which the heirs don't know about their inheritance until the time is right.
One estate planner interviewed for a Wall Street Journal on the subject said he set up such a trust for a couple late in 2012 after they said they were worried that their child might decide to "hang out on the beach" if he or she received a large amount of money. Instead, the heir will find out about the wealth at age 30.
It wasn't unusual for people to make or change estate plans late last year when estate tax exemptions and rates were very much in doubt as Congress wrangled over the so-called "fiscal cliff."
The bank we mentioned helped six times as many people create trusts last month as it had in December of 2011.
Some folks might wish to reconsider choices they made last month, now that some degree of certainty has been restored. For them, it's wise to sit down with a trusted estate planner and go over the details of the impact of new laws, rates and exemptions.
Source: The Wall Street Journal, "Can You Trust Your Kid With $5.25 Million?" Kelly Greene and Arden Dale, Jan. 18, 2013
- Our Lee County, Florida, firm assists client in and around Fort Myers with estate planning and trust administration.