Obama proposes $3.5 estate tax exclusion

President Obama's current proposal in his budget is a permanent the estate, and gift tax parameters as they applied during 2009. The top tax rate would be 45 percent and the exclusion amount would be $3.5 million for estate and $1 million for gift taxes. As reflected in the Administration’s adjusted baseline projection, the portability of unused estate and gift tax exclusion between spouses would be made permanent. The proposal would be effective for the estates of decedents dying, and for transfers made, after December 31, 2012.

This may be a position to negotiate. That is, the administration may agree to the $5 million of estate and gift tax but a 45% tax rate. That was a the Democratic party's position in the last election. Only time will tell, but generally, this is good news because it looks like we will not be going back to the $1 million exemption.

Premarital is needed to make earnings sole and separate

If you need to protect your fiancee or spouse from your creditors, then simply titling assets as separate property is not enough. A pre-marital agreement or post-marriage agreement is the only way your earnings can be considered separate property under Arizona law. Otherwise, if you use earnings to pay the mortgage or add to an investment in your spouse's name, you risk changing that asset to community property which your creditors can reach.

Common error: We will die at the same time

One of the most common error in the trusts is that couples assume they will die at about the same time. When one of the couple survives by years and the survivor needs to have access to the assets without family interference. It is amazing how many times an adult child will say she wants her deceased's parent's half of the funds and wants to keep money from the surviving parent -- or argues about how the money was spent after they both died. A trust needs enough flexibility to protect the couple whether one survives the other for years or if they pass at about the same time.

New Year Time for Resolutions to Have Powers of Attorney

The courts have made guardianships and conservatorships more complicated and expensive with new rules which were intended to limit court costs and attorneys fees. Avoid having the court in your business or health care, by having your own health care powers of attorney and financial durable powers of attorney. When I prepare powers of attorney, I cover concerns that have arisen with other clients such as when we deal with banks and hospitals, not just the the statutory requirements.

Protect Your Special Needs Adult Child

In order to protect the government benefits for your disabled adult child, be sure to have a special needs trust for any funds you leave at your deaths.

Electronic Passwords and Estate Planning

If you are ill, incapacitated or die, you will want your financial agent or Personal Representative to have use of your passwords and account information. Be sure to keep them in a safe place that can be found by the ones you trust. Placing a list with your notebook of estate planning documents is just one good idea.

Your Powers of Attorney Need to be Effective Immediately

Powers of attorney for finances or health need to be effective immediately, and not just effective once you have been declared incapacitated. If you are ill in the hospital or laid up at home, you really likely will need assistance right then, to deal with billing departments, banking and health care providers. There is no need to wait until a doctor has declared you incapacitated. Having your agents have immediate power to assist you when you need it is best.