Estate Taxes Finalized? Not Really.

Congress finally settled the issue of estate taxes last month. Really? No, they only put on another temporary patch for the next two years.

What does this mean for you? If your estate is valued at $10 million or less and you are married, you may be able to pass your entire estate to your heirs with no federal estate tax ($5 million exemption x 2). Anything above $10 million will be taxed at 35 percent. These numbers are for 2011 and 2012 only. After that, there is no certainty of what the tax rates will be because the current fix only lasts for two years.

Clients are still confused. How do they make long-term planning decisions when only short-term solutions are available? What if they own life insurance for estate-tax purposes but no longer feel it is needed with the $5 million exemption? What if the clients terminate the insurance now and find they need it again at a later date due to, once again, changing tax laws?

This presents a number of problems. The insurance may be more expensive to buy later due to increased age or medical issues. It may be unobtainable if the person’s medical condition is severe. Policy designs could change and not be as attractive or flexible.

The solution? Retain the current life insurance for at least the next two years, even if it is no longer needed based on the 2011 and 2012 tax rates. Life insurance is all about safety, security and guarantees. This is what clients need in their planning, so retain the current insurance until we see what 2013 brings. Then, hopefully, long-range decisions can be made.

Marvin H. Feldman, CLU, ChFC, RFC, President and CEO of Life Happens

by Marvin H. Feldman

Marvin H. Feldman, CLU, ChFC, RFC, is president of the Feldman Financial Group in Palm Harbor, Fla., and president and CEO of Life Happens. He is a 41-year Million Dollar Round Table member and was the 2002 president. He is a 33-year member of the MDRT Top of the Table and a past Top of the Table chairman. He also is the recipient of the 2011 John Newton Russell award, the highest honor bestowed on an individual by the insurance industry.

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