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Suite 200
Westlake Village, CA 91361
(818) 540-6967


Estate Planning

Generally, the goals of estate planning are to provide for a financial sense of security in life and to potentially maximize - given the client's goals and objectives - the estate for family and other heirs following death. To fully leverage estate preservation opportunities and develop strategies to help achieve distribution objectives, we consider:

  • Will and trust design strategies
  • Property ownership alternatives, including the review of titling and beneficiaries to coordinate with your overall plan
  • Estate tax reduction techniques
  • Insurance analysis
  • Qualified plan distribution alternatives
  • Family-gifting strategies
  • Charitable planning
  • Employee stock option optimization

Tax Considerations

After several "false" starts and much debate, legislation to repeal the federal estate tax continues to be offered by members of Congress. However, in the meantime, the American Taxpayer Relief Act of 2012 has made a higher exemption and maximum tax rate permanent.

Parameters of the Estate, Gift and GST Taxes Under Current Law (2014)
 Maximum Tax Rate (Percent)Applicable Exclusion Amount (the Exemption)
 Estate and GSTGiftEstate and GSTGift, LifetimeGift, annual, per recipient*
20113535$5 million$5 million$13,000
20123535$5.12** million$5.12** million$13,000
20134040$5.25 million$5.25 million$14,000
20144040$5.34 million$5.34 million$14,000

*The exemption, which was $10,000 in 1998, is indexed for inflation in $1,000 increments.

** The exemption amount is indexed for calendar years after 2011.

Source: Internal Revenue Code

Portability of Exemption Equivalent

The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (the Act) allows portability of a decedent's unused estate exemption to the decedent's surviving spouse. Portability has been made permanent under the American Taxpayer Relief Act of 2012 (ATRA).

In addition, portability applies to the unused exemption of the surviving spouse's most recent deceased spouse. Thus, beginning after 2010, a surviving spouse could use his/her exemption (assume $5,000,000) plus the unused exemption of his/her most recent deceased spouse, for a possible total of $10,000,000.

Reunification of the Estate and Gift Tax Regimes

The estate and gift tax exemption and tax rates will be the same. Thus, for 2013 the estate and gift tax exemptions will be $5.25 million; and the maximum estate and gift tax rate will be 40%.

Currently, the basis of inherited property is generally "stepped up" to its fair market value as of the decedent's death. Thus, if you inherit property and later sell it, you do not have to pay income tax on any appreciation that occurred before you inherited the property. Some property - tax-deferred money in retirement plans and individual retirement accounts, for example - will not be eligible for the step-up. This property will pass to heirs and beneficiaries with a "carryover" basis equal to the lesser of (1) the decedent's adjusted basis in the property or (2) the property's fair market value on the date of death.

For example, let's say your father dies in 2013 and you inherit closely held stock from him that he bought for $5 a share. The stock is worth $500 a share upon his death. Under the step-up in basis rules, if you sell the stock immediately, there would be no capital gains tax because of the basis step-up for property included in an estate. Lincoln Financial Advisors and its representatives do not offer legal or tax advice. This information should not be construed as legal or tax advice. You may want to consult a legal or tax advisor regarding this information as it relates to your personal circumstances.