Big 2013 estate-tax rate increases loom

Amid an uncertain political climate in Washington, North Bay estate-tax attorneys are urging clients to plan now, before a bevy of favorable rates expire at the end of this year.

[caption id="attachment_61427" align="alignright" width="358"] Nick Donovan, Malcolm Manwell, Ron Wargo[/caption]

"They've really got to move quickly," Nick Donovan, a partner at Napa law firm Gaw Van Male, said of high-wealth clients who may have not begun planning. "There are options, and it all has to be done by the end of the year. It really is a limited window."

At the end of 2012, Congress is set to let exemption rates of $5.12 million per person, or $10.24 million per married couple, expire to pre-2010 rates of $1 million per person, or $2 million per couple.

That significant difference in income can radically change plans in terms of gifting estates, businesses or assets to those receiving inheritances or gifts, according to local experts.

Additionally, a tax rate of 35 percent for gifts exceeding the $5.12 million threshold would revert to a much steeper rate of 55 percent without Congressional action.

The Obama administration and Congress could vote to extend the current rates or reach some form of compromise, but that's a variable attorneys say one shouldn't bet on. So for now, law firms and tax specialists expect to see a flurry of activity between now and Dec. 31.

But even without the impetus of expiration, local experts said the current rates are indeed favorable, making now the ideal time to plan on a practical, not simply political, level.

"It's a rare time in my career when you can make gifts and structure transactions with such low interest," said Malcolm Manwell, a partner with Santa Rosa law firm Perry, Johnson, Anderson, Miller & Moskowitz. "We don't know if Congress will extend this present regime or just let it lapse. In any event, the last two years have been a remarkable time to do some gifting."


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