Fiscal Cliff Deal Changes Estate Planning Strategies In Florida
The recent fiscal cliff tax deal has had significant effects on how people are planning their estates. The most significant aspect of the fiscal cliff deal is the estate tax. The new legislation keeps the exemption for the estate tax at $5.12 million, which is now permanent and can be moved between spouses. There was also an increase in tax rates for higher income people in Florida as a result of the new tax deal. These factors have made a significant difference in people’s estate planning strategies, especially those in higher income brackets.
The top tax bracket will now be charged 39.6 percent for income tax, while also facing an increase in taxes on dividends and capital gains. The new fiscal cliff tax deal raised taxes on dividends and capital gains to 20 percent. Itemized deductions and personal exemptions have also been reduced for those earning more than $250,000 for individuals and $300,000 for married couples filing jointly.
Many estate planning experts believe that the new tax increases make the option of storing assets in a life insurance policy more attractive. Those who earn less than the estate tax exemption may want to simply own their life insurance policies rather than utilizing the life insurance trust method. As a result of the new estate tax rules, insurance trusts may not be a good choice for most people, according to estate planning experts.
Along with financial considerations, it is also important to make sure estate planning documents are drafted properly. This will ensure that the documents are legally enforceable, which will decrease the chances of a lengthy probate process. It is also helpful to reexamine existing estate planning strategies regularly in order to adjust to any changes in applicable laws in Florida or elsewhere.