ESTATE TAX PLANNING UPDATE

April 1, 2013

We are writing to update our estate planning clients about recent developments in the federal estate, gift, and generation-skipping transfer tax laws which may affect your estate plan. Due to the large number of our clients we want to reach, please excuse this impersonal letter. If you have asked us to review your estate plan since January of this year, please disregard this letter.

The changes in the federal transfer tax laws enacted in 2010 are now permanent. The permanent changes to these laws may impact many of our clients in different respects. The most important change is that every U.S. citizen now has an exemption from the federal estate tax of $5,250,000. A husband and wife now have a combined federal estate tax exemption of $10,500,000. Over the years, as a way to preserve the federal estate tax exemption of the first spouse to die, estate planning lawyers have incorporated into the estate plan of married couples a trust commonly known as a “bypass trust,” a “credit shelter trust,” a “family trust,” or a “Trust B,” all of which shelter the assets of the trust from estate taxes upon the death of the first spouse and upon the later death of the surviving spouse. Therefore, for many of our clients, the complexity of incorporating a trust for the benefit of the surviving spouse may no longer be needed, and in some cases, estate plans may be greatly simplified.

In addition to increasing the federal estate tax exemption (and the federal lifetime gift tax exemption), the new federal law allows the estate of the surviving spouse to benefit from any unused federal estate tax exemption of the estate of the first spouse to die in the surviving spouse’s estate. This provision is referred to as “portability.” This federal estate tax provision may eliminate the need to include a credit shelter or bypass trust in your estate plan altogether.

Since 1953, Sommer, Udall, Sutin, Hardwick & Hyatt, P.A. (“SUS”) has represented many clients with respect to their estate planning. In recent years, the SUS estate planning practice has greatly expanded. Last year, Robert Worcester and Janet McKay joined our law firm and they both have been practicing estate planning for the last 30 years. SUS now has three senior lawyers who are members of the prestigious national membership organization, American College of Trust and Estate Counsel (“ACTEC”). SUS is the only law firm in New Mexico with three ACTEC members. Seven of our fifteen lawyers and two of our paralegals substantially devote themselves to estate planning.

You are invited to call any member of our estate planning group if you want us to review your estate planning in light of the recent changes to the federal transfer tax regime or if your family situation has changed since we last met. Thank you for allowing us to be of service to you.