J. Kelly Kennedy, Attorney/CPA, PLLC

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Attorney and CPA

The end of the sequester could bring changes to estate plans

The purpose of estate planning is to preserve assets for future generations, but taxes can throw a wrench in the most carefully laid plans. Florida and federal tax laws change every year, and these changes can have big effects on wills, trusts and other estate planning instruments. It's hard to plan for tax implications with full certainty when these laws can alter things so greatly.

Recently, the laws have seemed more uncertain than ever. As of this writing, the federal government is in a self-imposed spending cut crisis known as sequestration, with no resolution on the horizon. Some experts have said efforts to resolve the crisis will inevitably involve closing tax loopholes. Some of the likely candidates among these loopholes are certain strategies for trusts which have, at least up until now, helped estates to avoid some serious tax consequences. Those who wish to take advantage of these strategies may have to act quickly.

Generally, the main purpose of a living trust is to avoid the costly and time-consuming probate process. But another advantage is that trusts can greatly reduce taxes. Florida does not have an estate tax (the tax on an estate that detractors call "the death tax") but the federal government does for estates worth more than $1 million. Yet a well-designed trust can help avoid some or all of this tax and others, helping to preserve more assets for future generations.

Of course, no one can predict the future with any real certainty. Those who are drafting estate planning documents must allow for some modification as the law and a family's needs change. And after coming up with a plan, it's a good idea to keep track of it to make sure it will still fulfill its intended purposes.

Source: Forbes, "Estate Planning Moves BEFORE Sequestration Is Resolved," Rob Clarfeld, March 8, 2013

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