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  • September 9, 2013

For many, the second half of 2012 was a stressful time for estate planning decisions. Concerned about the potential effects of changing laws, many people updated their estate plans with taxation in mind. Now, in the wake of the American Taxpayer Relief Act of 2012 (the “2012 Tax Act”), individuals, families, and their advisors should be taking another look at how these changes in the tax code connect to the design of their estate plans.

The 2012 Tax Act most critically affects:

  • Individuals with an estate of less than $5 million
  • Married couples with an estate of less than $10 million

For families and individuals with estates falling within these guidelines, estate taxation is no longer a concern. As a result, a large portion of these estates now have overly complicated plans that can be simplified to meet their interests and wishes more efficiently.

It is important to review your wealth plan periodically to ensure your objectives are at the center of its design. Estates below these taxable thresholds are now able to focus more purely on the structure of wealth transfer and the needs of family members rather than on tax considerations. Depending on your particular circumstances, you may now be better served to have a simple will or a revocable living trust to avoid potential issues, such as probate.

However, many individuals and families may be on the boundaries of these taxable thresholds. For those, it is important to stay on top of changes in your estate valuation. Once you cross an exemption threshold, a 40 percent tax rate applies.

For individuals or families with a net worth already exceeding the exemption, your estate plan likely does not need immediate attention due to the 2012 Tax Act. However, if you have not recently reviewed your estate plan, it is smart to take another look.

We recommend that you have your documents reviewed at least every five years, or whenever you have a significant change in wealth or a change in the family, to evaluate whether your plan still reflects your goals. As you progress through life, welcome a new family member, or start a new business, your needs naturally change as does your financial situation. Through our ConnectView approach, we examine each variable in your financial world to help you clarify your goals and remain on track to reach them.

Whether the effects of the 2012 Tax Act are making you reconsider your estate plan, or it’s simply time to review your wealth plan, please feel free to reach out to your relationship manager or Bill Schmidt, our senior trust officer, with any questions or to schedule a meeting with your local team.





First Western Trust cannot provide tax advice. Please consult your tax advisor for guidance on how the information contained within may apply to your specific situation.