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Long term care planning a must for Kent residents

After a person dies, as Kent readers may know, the responsibility for winding up financial affairs and distributing estate assets typically falls to an executor who is either nominated in the testator's will or appointed by the court. When it comes to smart and efficient estate administration, the timing of certain activities can sometimes have a significant impact on the distribution or valuation of estate assets.

Timing can also play a critical role when it comes to inheritance tax reporting and tax liabilities. One particular deadline can have a profound effect on estate planning and future estate taxes. Although the deadline will impact only a relatively small percentage of Americans, its importance is so significant that anyone who may possibly be affected will want to be certain that it is taken into account during the estate administration process.

The American Taxpayer Relief Act of 2012, which passed through the legislature on New Year's Day as part of the hotly contested "fiscal cliff" negotiations, made permanent a previously temporary provision that can have dramatic implications for affluent estates.

The new act extends a rule known as "portability" that allows a surviving spouse to claim the remainder of a deceased spouse's gift tax exemption.

Portability means that a widow, for example, could add whatever remains of her deceased husband's lifetime gift tax exemption to her own $5.12 million individual exemption. If the deceased husband never made any lifetime gifts, the widow could gift away more than $10 million during her lifetime with no adverse estate tax consequences.

In order to take advantage of portability, however, the widow would need to make sure that an estate tax return gets filed for her husband's estate no later than nine month's after his death. A six month extension may be available, but everyone involved in estate administration will want to be aware of the nine month deadline in order to avoid potentially losing the portability election altogether. Washingtonians who may benefit from portability will want to consult with a professional to make sure that this important estate planning deadline does not slip by without appropriate action.

Source: Forbes, "The Deadline Every Married Person (And Financial Advisor) Needs To Know About," Deborah L. Jacobs, Jan. 17, 2013

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