One outcome of the tax code changes that took effect in 2013 that has garnered some attention is the new permanent transfer tax system that applies to gifts and inheritances. “Permanent” in this context means that Congress would have to pass legislation to alter the system. Changes appear unlikely, given the current makeup of our government. We are hopeful that we have entered a period of relative stability with respect to this portion of our tax code.

There is no limit to the size of a gift to one’s spouse or to qualified charities. Under the new rules, each person may gift annually up to $14,000 to as many other recipients as he or she likes. This amount is adjusted for inflation automatically from now on. Also, the sliding tax-rate scale that applies to gifts over that limit and taxable estates has been replaced with a flat 40 percent rate. Both of these developments will make planning more straightforward.

In addition, U.S. citizens can leave up to $5.25 million free of estate taxes if they pass away in 2013. This $5.25 million exemption amount is automatically adjusted for inflation each year. Plus, the portability feature that first appeared in the 2010 tax law did not lapse and is now permanent. Portability allows a surviving spouse the ability to use, in addition to his or her own exemption, any unused portion of a deceased spouse’s exemption. Married couples can leave up to $10.5 million free of estate tax. As a result, for most people, estate tax issues are no longer a concern.

This reduction in potential taxes does not reduce the need for estate planning. The goal of estate planning is to make sure assets are available to the desired parties at the desired times. Whether this happens, or not is driven by factors that exist whether a potential estate tax applies or not. Three things dictate the flow of assets in one’s estate: designations, ownership and provisions.  


Many kinds of accounts allow the account owner to name beneficiaries. Making beneficiary designations is a routine part of setting up IRA, 401(k), 403(b) and other retirement accounts. They are also a standard part of life insurance and annuity contracts. What many do not realize is that the named beneficiary of such accounts gets those funds, outside of the probate process, regardless of what the owner’s will or trust might say. For this reason, it is essential to keep your beneficiary designations up to date and aligned with your wishes. It doesn’t matter if one’s will says you want to leave everything to your daughter, if your son is named primary beneficiary, he is entitled to those funds.


How an asset is titled controls how it is treated. Similar to how beneficiary designations dictate who inherits, assets owned “joint with rights of survivorship” become the surviving owner’s asset by operation of law upon a death regardless of what one’s will or trust may say. This can seem like a simple way to avoid probate, but putting one’s child on as a joint owner can disinherit all the other siblings. Accounts owned individually without a beneficiary designation go through probate. This makes the transfer part of the public record, subject to the terms of the deceased’s will, and exposed to the costs and delays that give probate an unflattering reputation. Many people take the time to create trusts to control the disbursement of their assets, avoid probate and make the management of their affairs easier should they become incapacitated. However, the only assets subject to such treatment are assets actually titled in the name of the trust.


Even if assets are titled correctly, it is important to revisit the provisions in one’s will, trusts, powers of attorney, living will and health care surrogate. Often, the people named in these documents to receive funds or make decisions fall ill, die, marry, divorce, get into financial or legal trouble, make it big, become more mature, or have children and grandchildren. As life presents its twists and turns, the particular provisions of one’s estate planning documents may no longer fit the situation very well.

Dan Moisand, CFP, has been featured as one of the America’s top independent financial advisors by most leading financial advisor publications.  He has spoken to advisor groups on five continents on topics such as managing investments and navigating tax complexities for retirees, retirement readiness, and topics relating to the development of the financial planning profession.  He practices in Melbourne, Fla.  You can reach him at (321) 253-5400 or