File 029340
Market Watch Article on Estate Tax Policy Changes (File 029340)
MarketWatch article from April 2013 discussing President Obama's proposed budget changes to estate tax, gift tax, and generation-skipping transfer tax exemptions, and their implications for wealth transfer planning.
Summary
This MarketWatch article from April 29, 2013 analyzes President Barack Obama's fiscal year 2014 budget proposal to reduce estate tax exemptions from $5.25 million to $3.5 million and gift tax exemptions from $5 million to $1 million starting in 2018. The article examines potential policy changes including the elimination of family business valuation discounts, modifications to grantor-retained annuity trusts (GRATs), and restrictions on inherited IRA withdrawals. The proposal would reportedly raise $79 billion over 10 years through these estate tax changes and closing other tax loopholes.
ning boon. pnuIC GJUILC-LaA UcILLIGS -leUre - mama watcnnap:// of ogs.maricetwaten.comiencoreizu I .5/V4/29/coming-soon...arIs Another Bear Market Around the Corner?If you have a $500,000 portfolios you should download the latest report by Forbes columnistKen Fisher's firm. It tells you where we think the stock market is headed and why. Thismust-read report includes our latest stock market forecast, plus research and analysis you canuse in your portfolio right now. t Click Hare to DownloadFISliEft INVES1MPNMarket WatchApril 29, 2013, 12:09 PM ETComing soon: More estate-tax battlesThe word "permanent" — at least in the corridors of Washington, D.C. — doesn't mean what you think itmeans. And that should prompt you to keep a close eye on your estate plans.More inheritance headaches loom.The American Taxpayer Relief Act of 2012, which wassigned into law in early January, established a"permanent" $5 million estate-tax exemption. Thelegislation also set the same $5 million exemption for thefederal gift tax and generation-skipping transfer tax.(That figure is indexed for inflation, which makes the2013 exemption $5.25 million.)But as Kelly Greene reported this weekend in the WaltStreet Journal, President Barack Obama's fiscal year2014 budget calls for lowering the exclusion for estate taxes and the generation-skipping transfer tax to$3.5 million (albeit not until 2018). The gift-tax exemption, meanwhile, would drop to $1 million. Theproposed figures would be a return to 2009 levels and would no longer be indexed for inflation.According to the proposed budget, the changes — coupled with closing other "estate-tax loopholes" —would raise $79 billion over 10 years. Which means that the only permanent thing about estate planningwould be efforts by financial advisers and tax attorneys to stay one step ahead of Washington's searchfor revenue.To be sure, the president's proposals are unlikely to be enacted in their current form. But Greenehighlights several possible changes that investors and families should watch for:"Discounts" could disappear. Currently, the value of a minority share in a business — when transferredfrom one family member to another — can be "discounted," resulting in a tidy tax savings. The WhiteHouse, in previous budgets, has called for limiting or eliminating such discounts to family members. Butthe absence of that idea in the budget for 2014 could mean the Obama administration believes theTreasury Department already has the authority to change the rules — and simply will issue newregulations to do so. If that's the case, families considering such transfers might want to act soonerrather than later.GRATs could get watered down. A grantor-retained annuity trust, or GRAT, lets a person give a portionof an asset's future profits to heirs tax-free. (One popular use of GRATs: Passing along stocks whoseprices are depressed.) Such transfers take place over a set time period — as short as two years. But thepresident's budget would require GRATs to have a minimum term of 10 years, making these trusts less1 of 2 4/29/13 1:26 PM 1 iiiii 6 avvu. inkJ1G cblalc-taA U1LLIS - cticore - IvntrKet Watettattractive.nttp://blogs.marketwatch.com/encore/2013/04/29/coming-soon...Individual retirement accounts could get emptied faster. Currently, people who inherit IRAs andsimilar tax-deferred savings accounts are able to "stretch" their withdrawals across their life expectancy.The budget proposal would require most beneficiaries — other than widows and widowers — to cash outthe accounts within five years. Already, Greene notes, some older adults whose wealth is concentratedin IRAs are considering moving the accounts into trusts to help their families keep up with, and follow,the rules.Copyright 2013 Dow Jones & Company, Inc. All Rights ReservedThis copy is for your personal, non-commercial use only. Distribution and use of this material are governed by our Subscriber Agreement and bycopyright law. For non-personal use or to order multiple copies, please contact Dow Jones Reprints at 1-800-843-0008 or visitwww.djreprints.com2 of 2 4/29/13 1:26 PM