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Congress creates window for estate and gift tax savings for 2011-12

us-capitol Congress has created a temporary “window” – between now and the end of 2012 – in which many people can save a lot of money in estate and gift taxes.

You might be able to take advantage of this opportunity by transferring significant assets to a trust. But as they say on TV, hurry – this is a limited-time offer from the federal government.

During 2011 and 2012, the federal estate tax exemption will be $5 million, meaning the tax will be applied only to estates that are larger than that. Importantly, the lifetime exemption from the federal gift tax has also been raised, from $1 million to $5 million.

The gift tax applies to transfers of assets. In general, any person can give any person up to $13,000 a year without there being any gift tax. If you give someone more than $13,000 in a calendar year, then the excess is subject to gift tax.

Here’s yet another example of why trusts in a will are a good idea

In a recent case, a Texas man inherited $400,000 in cash from his aunt. The man’s ex-wife went to court and claimed that as a result, his child support payments should be increased.

The Texas Court of Appeals agreed with the ex-wife. It said that even though the $400,000 wasn’t wages or earnings, it was still a “resource” that had to be considered in determining how much the father had to pay for his two children.

Do surviving spouses have a right to an IRA or a 401(k)?

Do surviving spouses have a right to an IRA or a 401k When choosing a beneficiary for a retirement plan, it’s important to understand how your spouse will be treated under the plan. The rules are different for 401(k)s and IRAs.

With a 401(k) plan, a surviving spouse is the automatic beneficiary of the plan. If you want to name someone other than your spouse as a beneficiary, your spouse must agree to this in writing.

There are some exceptions; for example, the rule might not apply if you and your spouse have been married for a very short time. But in general, it’s a strict rule. In fact, even if your spouse signed a prenuptial agreement saying that he or she has no right to your 401(k), that might not be good enough, because he or she wasn’t your “spouse” at the time of the signing.

Always consult a lawyer before you sign a release!

always-consult-with-a-lawyer-before-you-sign-a-release Insurance companies and other businesses often try to get injured consumers to sign a release right away, before they talk with a lawyer. Sometimes they actually say that they’re trying to protect or take care of the consumer, and that there’s “no need to get lawyers involved.”

Beware! There’s a reason they don’t want consumers to talk with a lawyer, which is that they don’t want consumers to understand all their rights.

Be careful with joint property and ‘payable on death’ accounts

If you intend to leave your children equal shares of your estate, don’t forget to consider any money or property held jointly with a child. If you have recently added a child to a bank account, own property jointly with one of your children, or have set up a payable-on-death account with a child as the beneficiary, you might want to revise your will, or at least reconsider how the asset is titled.

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