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Archive for August, 2010

This might just be the year to give!

As the estate tax saga draws on, many have overlooked the gift tax and the current tax savings opportunities available. Currently, the gift tax rate is 35%, the lowest rate since the 1930s. The gift tax rate is set to increase to 55% in 2011. This 20 percentage point difference results in a 57% tax rate increase.

For those with significant wealth, reducing your estate through gifting may be an option to consider. However, as Paul Sullivan points out in his recent article, A Year to Give to Your Heirs, and Save on Taxes, there are many things to think about, including the potential psychological impact that could result from bestowing great wealth upon heirs and raising a red flag to the IRS.

Gifting as an estate planning technique has never been more attractive and for some it may make perfect sense.

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Congratulations! You have created an estate plan, but now, where to keep the documents. Your estate plan likely includes a Healthcare Directive, a Power of Attorney, a Will and possibly a Trust.

The Healthcare Directive and Power of Attorney are needed in the event of incapacity. The Will is needed upon your death. In either event, when the documents are needed, you will not be able to direct someone to their location.

Copies of the Healthcare Directive are acceptable and should be provided to your doctor(s) and the hospital anytime you are admitted for a procedure. Originals of the other documents are generally required and should be safeguarded until they are needed.

It is important that a few trusted people know the location of your estate planning documents and how to access them. A safe deposit box at a bank is NOT such a location. But why? Yes, they will be safe there; however, the documents granting someone access to the safe deposit box (i.e., your Power of Attorney) will be in the safe deposit box.

Instead, the recommended location for your estate planning documents is a fire-proof safe at your home or the home of someone you trust. Recently, I learned from a few fire fighters that an alternative location in the absence of a fire-proof safe is your freezer or deep freeze! If you choose this alternate option, you will need to protect the documents from the elements (i.e., pack the documents in multiple ziplock bags or a Tupperware container).

Remember, someone else (in addition to your spouse) needs to know both the location of the documents and how to access them.

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