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Estate Planning and the American Taxpayer Relief Act

Posted on in Estate Planning

The new tax code and law has many people thinking that only the very wealthy need to worry about estate planning and estate taxes, according to The New York Times. The federal tax on estates, according to the Times, is now $5.25 million, or $10.5 million for a couple, which seems far out of the range of most people's assets. And yet the American Taxpayer Relief Act, passed in January of this year, has effects far greater than just to change the federal tax rate of estates. "Many people may not want to think about how the changes… could affect them," according to the Times. "But if they don't, they may be shocked come next year's tax season. Or worse, they may end up making financial plans based on a cursory understanding of what the changes mean for them and regret it later."

Because of this, it's important to review the changes to the federal tax code under the American Taxpayer Relief Act and figure out just how they affect you. It's true that the exemption was raised—a fact that caused quite a bit of political rancor. Yet according to the Times, "the tax rate fell from 2001 until 2010, when the estate tax disappeared for most of that year. When the tax returned in 2011 and 2012, the exemption was set at a historically generous $5 million indexed for inflation and a 35 percent rate above that."

In addition to estate tax exemptions that need to be studied when you're ready to begin your estate plan, there are several other aspects of estate planning that need to be addressed, regardless of income, according to the Times. "One is the beneficiary designation form, which determines who gets assets like a retirement account or an insurance policy." Often these are determined when accounts are opened and then forgotten. If marriages change, relationships falter, or people die, and these documents don't reflect that, the person can wind up in trouble. These beneficiary forms override even the most recent will.

For these and other complicated matters regarding estate planning—regardless of your income and estate worth—contact a dedicated Illinois estate planning attorney today.

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