The Federal Estate Tax and Protecting Family Wealth by Texas Family Wealth Protection Lawyer:

Protecting Family Wealth From The Government Requires Giving Up Control of Wealth By Texas Family Wealth Protection Lawyer Jason S. Coomer

The current Federal Estate Tax will expire on December 31, 2012 and the exemption could reset to $1 million and a 55% maximum tax rate on non-exempt assets.  Many families are facing difficult decisions as to if they should transfer large amounts of wealth to the next generation through gifts and into irrevocable trusts to avoid the federal estate tax or hope the federal estate tax laws will be revised again to extend large federal tax exemptions. 

Major Estate Tax Change Looming - Don't Be A Last Minute Louie - Forbes

"The case for making a large gift in 2012 to use up the unified credit against gift and estate taxes is compelling for people who can afford it.  Right now, taxable gifts totaling $5,120,000 can be made in a lifetime without incurring liability."

The Medicaid 60 Month Transfer Rule

 
Many families will also face the decision as to whether to transfer assets to allow loved ones to qualify for Medicaid and avoid large medical expenses and large Medicaid liens.  The person seeking to qualify for Medicaid benefits to help pay for nursing home care and other medical benefits will need to transfer their property at least 60 months before qualifying for Medicaid.

This 60 month look back period forces families to make difficult decisions well before a situation arises.  On a personal note the person transferring their assets has to be sure they know what they are doing and greatly trust those that to whom they are transferring their assets.

How Do I Protect My Assets From The Government Under Current Law?

Under current federal law, it is necessary for the person transferring their assets to give up control of their assets in order to take advantage of the current federal exemptions or to qualify for Medicaid benefits.  For a person to give up control of their assets, the assets need to be transferred through gift, death, or irrevocable trust. 

In all of these options the person transferring their assets will have to give up control of their assets and cannot take back their assets if their situation changes.  Giving up control in assets is difficult for many people as transferring their assets will make them dependent on others and place them in a vulnerable position.  For some people and their families, it is worth the risk to protect assets from the government.  For other people and their families, the risk of losing control of their wealth and relying on those that they transferred their wealth to is not worth the risk.  They would prefer to control their wealth to the very end and risk losing a large portion to the government, medical bills, or opportunists.

 

The Lucky Few:  Five Families Save $8.75 Billion in 2010 

In 2010, the federal estate tax exemption was unlimited and five billionaires died without paying any federal estate taxes.   The savings from federal estate tax to these families was approximately $8.75 billion.  These billionaires were George Steinbrenner, Walter Shorenstein, Dan Duncan, Mary Cargill and John Kluge. In this election year there are some calls to repeal the death tax and extend the unlimited federal exemption.  It is expected that if the Republicans win the presidency and congress that the unlimited federal exemption will be extended.  Additionally, if the Democrats win it is expected that a federal exemption of around $5 million per person or $10 million per married couple will be extended.  However, please keep in mind with significant government budget issues, it is not clear if either party will be able to allow unlimited or large exemptions to continue in the future.

Further, the Medicaid qualification 60 month rule is expected to stay in place.  This rule will impact many families and will place many families in difficult planning situations.  In fact, with the need to reduce Medicaid benefits by government, it is expected that new rules to limit Medicaid qualifications will be put in place in the future placing families with assets of $100,000.00 to $2,000,000.00 in difficult estate planning situations.