With the unusually favorable estate and gift tax rules set to expire, more and more Americans are beginning to consider whether it may be better to give away their money today to take advantage of these favorable laws.
Until the end of this year, Americans may give up to $5.12 million (and twice that for a couple) without being taxed, and with any amount about that amount being gifted at a relatively low 35% tax rate. In comparison, without congressional action, January 2013 will bring a $1 million gift tax exemption and any amounts above that being gifted will be taxed at a 55% tax rate.
So, with such a different tax imposition depending upon the year a gift is made, many Americans are considering action this year. However, these same Americans are looking for ways to retain some control over the money they are contemplating gifting.
Enter the answer: planning with irrevocable trusts. Irrevocable trusts make good sense for those wealthier Americans who are trying to remove a portion of assets from their taxable estate, yet still retain some amount of control over their heirs. For those Americans who may not have a taxable estate, but still would like to retain some level of control over their heirs from the grave, their answer may come in the form of a revocable trust. Regardless of your taxable estate status, there are many trust options available, one of which may be perfect for you to retain the control you desire over your heirs . . . even after you are gone.
To learn more about trust-based planning and the type of control these types of plans allow you to retain over your beneficiaries, read this article.