Anaheim, CA, May 23, 2012, 9:33 am -- /EPR NETWORK/ -- The president signed a new tax law back in December of 2010 giving the owners of family businesses probably the biggest tax break to come in several years.
However, that tax break, the lifetime gift exemption, $5 Million ($10 Million for a married couple), is in effect for only two years (2011 & 2012).
While the estate tax exemption amount had been increasing year to year, the lifetime gift exemption had stayed at $1 Million over the past 10 years.
But, the current law sunsets on December 31, 2012, and on January 1, 2013, the lifetime gift exclusion amount and the estate tax exemption will both decrease to $1 Million.
Even if you had previously used up your $1 Million lifetime gift tax exemption in prior years, you still have time to shift an additional $4 Million out of your estate to your family.
This two year window allows the owners of family businesses to transfer the stock of their closely held companies to the children or other family members and reduce the size of their estates, all tax free up to the exemption amount.
This strategy raises difficult questions for those now in charge as to how to maintain control and/or stream of income from the company they currently work in and manage. How do they protect their interests and maintain their retirement while passing wealth down to the family?
Experienced estate planning lawyers can develop salary continuation plans, consulting agreements, and other legal mechanisms to protect the owner's financial stake in the family company.
Other difficult questions include how to treat other beneficiaries fairly when only one of the beneficiaries is going to eventually lead the business.
This may mean an amendment to the estate plan. The timing, nature and size of the gifts have to be considered in the context of the overall estate plan.
Time is of the essence in view of the fact that the $5 Million lifetime gift exclusion will disappear at the end of 2012, and go back to $1 Million.
It is wise to consult with your estate planning attorney before making any kind of gift transfer said Orange County Estate Planning Attorney Dwight E. Tompkins.
For additional information on the latest estate planning law contact Attorney Dwight E. Tompkins or visit www.Tompkins-law.com.
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About Estate Planning Attorney Dwight E. Tompkins
Dwight Tompkins has 21 years of experience in Estate Planning, probate, Living Trusts, and Business Planning; 20 years as a solo practitioner. Unlike larger firms, he personally works directly with his clients, which allows him to provide a more affordable, cost-effective approach to solving their needs in these areas of the law.
Dwight E. Tompkins