Estate‑Tax Changes Discussed in Obama Administration Budget

CULE DUVULL. IYLUIT CSLALE-LAA UALUTS - DIICUOTe - IViaTKeELWwalcn nutp://D1Ogs .marketwatcn.comyencore/ ZU | 3/U4/2Z9/coming-soon... 1 of 2 Is Another Bear Market Around the Corner? If you have a $500,000 portfolio, you should download the latest report by Forbes columnist Ken Fisher's firm, It tells you where we think the stock market is headed and why. This must-read report includes our latest stock market forecast, plus research and analysis you can use in your portfolio right now. & | Click Here to Download Market¥Watch Fishek INVESTMENTS” April 29, 2013, 12:09 PM ET Coming soon: More estate-tax battles The word “permanent” — at least in the corridors of Washington, D.C. — doesn’t mean what you think it means. And that should prompt you to keep a close eye on your estate plans. The American Taxpayer Relief Act of 2012, which was signed into law in early January, established a 33 3 y ry 9%: “permanent” $5 million estate-tax exemption. The SF legislation also set the same $5 million exemption for the fii federal gift tax and generation-skipping transfer tax. se (That figure is indexed for inflation, which makes the 2013 exemption $5.25 million.) But as Kelly Greene reported this weekend in the Wall More inheritance headaches loom. Street Journal, President Barack Obama's fiscal year 2014 budget calls for lowering the exclusion for estate taxes and the generation-skipping transfer tax to $3.5 million (albeit not until 2018). The gift-tax exemption, meanwhile, would drop to $1 million. The proposed figures would be a return to 2009 levels and would no longer be indexed for inflation. According to the proposed budget, the changes — coupled with closing other “estate-tax loopholes” — would raise $79 billion over 10 years. Which means that the only permanent thing about estate planning would be efforts by financial advisers and tax attorneys to stay one step ahead of Washington’s search for revenue. To be sure, the president’s proposals are unlikely to be enacted in their current form. But Greene highlights several possible changes that investors and families should watch for: “Discounts” could disappear. Currently, the value of a minority share in a business — when transferred from one family member to another — can be “discounted,” resulting in a tidy tax savings. The White House, in previous budgets, has called for limiting or eliminating such discounts to family members. But the absence of that idea in the budget for 2014 could mean the Obama administration believes the Treasury Department already has the authority to change the rules — and simply will issue new regulations to do so. If that’s the case, families considering such transfers might want to act sooner rather than later. GRATs could get watered down. A grantor-retained annuity trust, or GRAT, lets a person give a portion of an asset's future profits to heirs tax-free. (One popular use of GRATs: Passing along stocks whose prices are depressed.) Such transfers take place over a set time period — as short as two years. But the president's budget would require GRATs to have a minimum term of 10 years, making these trusts less 4/29/13 1:26 PM HOUSE_OVERSIGHT_029340