Texas estate planning could be affected by sequester

As many readers in Texas know, the sequester is the latest attempt in the nation’s capital to make our leaders agree on how to reduce spending and pay for federal debts. This is the second such action this year, having had the fiscal cliff at the new year. Now, some are watching to see how the laws affecting estate planning are changed as the negotiations continue.

In one recent report that may be of interest to readers in Texas, an official notes that some trusts commonly used in estate planning could be affected by the sequester. These include trusts that are intended to help those with high value assets to move money outside of their estate. This effort can limit the amount of estate tax owed by an estate at the time of death of the trust creator.

The GRAT, grantor and dynasty trusts that could be affected are often used by people in estate planning who have assets valued higher than the estate tax exemption. The now-permanent amount of the exemption is $5 million. That number is adjusted each year based on inflation from the year 2010.

It is as yet unclear how the sequester will change the estate planning process. However, if there are changes made, the good news is that there are other tools that can be used to limit the amount of estate tax owed. To ensure that the best possible outcome is planned for, a person may do well to review the laws – both current and proposed – as they enter the estate planning process.

Source: forbes.com, “Estate Planning Moves BEFORE Sequestration Is Resolved,” Rob Clarfeld, March 8, 2013

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