Friday, January 18, 2013

What happens now

national affairs secrets of the bailout taibbi
Illustration by Victor Juhasz
Estate planners were busy at the end of 2012 with the Fiscal Cliff. We all were worried about the
 "death tax" coming back, at lower levels, but it didn't. I called that in November.  Now, everyone has $5.25 million they can keep tax free, and the annual exclusion is up to $14,000 per year, so gifting is easier/cheaper than its ever been. All that fuss, all those trusts, seemingly for nothing. Who has $5 million to worry about, anyway?

We do have higher income taxes, we have more taxes built into dividends and capital gains.  Who knows what our income tax returns will look like come tax season, but if you get a paycheck, you already know that you somehow just got a reverse raise. All for, what, exactly? Deficit reduction? Universal healthcare?

With the "death"/estate tax taken care of for now, planning is pretty straight forward.  Have your affairs set in order for the unexpected (via a will, and maybe a trust) and have your other assets
(bank accounts, insurance policies, investments) styled with beneficiary designations so there is no issue at death. Easy stuff. Now comes the hard part, in acquiring enough wealth to have to worry about any estate or gift taxes down the road, but that's another story.

So, what do I need to worry about now? Not much, but healthcare costs will continue to rise. How is your insurance situation? Are you looking at long-term care, or a government program, like medicare or medicaid? Do you have an elderly parent, or relative that is going to need assistance? "Uncle Steve is in fine health..." for now. If he has a stroke next year, Steve's estate is toast if he ends up on medicaid. Its just not that hard to plan ahead, and you have to do it now, as there is a five (5) year look back period to worry about.  Steve's house? At least the heirs will get that after he passes away, right? Gone, unless you plan ahead or use a LadyBird Deed.

Congress seemingly did us a favor, in restoring the estate tax, but it's a favor that doesn't help too many normal folks.

So, where, exactly, are we? The new taxes, that are supposed to help reduce the deficit? A huge chunk are already spent in the $51 Billion Hurricane Sandy Relief Bill, through earmarks that don't have anything to do with helping the communities affected by the storm.  How hard is it to help those in need, without sneaking in unnecessary, "pork" spending?  We have another debt ceiling crisis coming (we already hit it), which the house just pushed down the road another three months, but at least they didn't have to make that $1 trillion coin. Yet.

Want to get even more upset? Read Matt Taibi's article in the Rolling Stone about the back story and current status of all the Wall Street Bailout Money.  "It's all paid back...taxpayers will make a profit..." all these feel-good success stories seem to be just smoke and mirrors accounting tricks, by taking lower interest loans from the government to pay back their higher interest, TARP/bailout loans and calling it a victory for the common man. "There will be strict rules against paying big bonuses..." yes, but don't worry, there are loopholes as big as Long Island to get around that, and the executives whose risk hurt so many across the country were rewarded handsomely on the back burner.  When I heard a conservative quote that somewhere between 10-30% of the TARP money was just assumed to end up going to "fraud, just because." I was irate. Now that I know more...I'm just disappointed, and frustrated at our leadership.

But that is where we are.  Just make sure you have a plan. 

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