The beginning of the year is the “perfect time to look at your business and at your estate plan and at your investments to make sure all of your financial and estate affairs are in order,” estate planner Paul Rabalais says.
One of the big mistakes people make in estate planning is they don’t revisit the plan from time to time to ensure it still fits with their objectives, he says, especially since there are always tax law changes going into effect on Jan. 1.
For those with especially large estates, the hottest topic might be the estate tax [often called, in a clever bit of propaganda by tax opponents, the “death tax”]. The Republican regime made eliminating the estate tax a priority. The estate value that could be passed on tax-free was raised to $2 million, then $3.1 million; the current schedule calls for a $3.5 million exemption in 2009, no estate tax in 2010, and a $1 million exemption in 2011. It will be interesting to see what the Democrats do with the estate tax over the next two years.
You can, however, reduce the size of your estate before you die with gifts to your heirs. The limit to how much you can give to one of your heirs tax-free has been increased from $12,000 to $13,000 per recipient per year for 2009. Many people are using the so-called “lifetime gift” exemption; with portfolios down, now might be the time to transfer $1 million of your portfolio to your heirs; if the market goes up, that appreciation won’t count as part of your estate.
Other topics on the radar of tax and financial planning professionals right now include:
• The GO Zone benefit of 50% accelerated depreciation for new properties ended Dec. 31 for properties in the Capital Region, but has been extended for properties in parishes that were hit particularly hard by 2005 hurricanes Katrina and Rita.
• The Work Opportunity Tax Credit has been reauthorized; business owners can receive a credit of up to $2,400 per employee in many cases.
• Louisiana is giving a tax credit of 7% based on how much you pay for homeowner’s insurance for 2008 only.
• Many people were concerned last year about higher income taxes in the near future under a potential Obama administration, but those fears have subsided a bit, as hiking taxes in the middle of a financial crisis seems less likely. Look for a number of targeted tax cuts in the pending stimulus legislation.