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Help Us Give Back to You

– and to those who matter most!

The ideas and opportunities presented in this newsletter are offered in the spirit of inspiring and refining your own thinking about tax and estate matters — after all, everyone wants to preserve more of what their hard work has acquired, both for themselves and the family and friends they value most.

Downstate's Office of Philanthropy can help you to explore the possibilities: we offer a wide range of planned giving opportunities that provide donors with an assortment of desirable tax and estate planning benefits.

Contact us today to learn more about how helping Downstate is really helping yourself!

Main Office: 718.270.4418

Please Note: The information presented here is not intended as financial or legal advice. For financial advice, please consult appropriately licensed financial planning experts. For legal advice, please consult an attorney. Figures cited in examples are for hypothetical purposes only and are subject to change. References to estate and income tax include federal taxes only. Individual state taxes and/or state law may impact your results.

Money and You

More Money for You - and the Ones You Love!

Edition No. 2 — Fall 2012

This quarterly Tax and Estate Planning Newsletter is brought to you by Downstate's Planned Giving Advisory Board. Read on to learn more about significant opportunities that may benefit yourself and those you love most.

Featured Article: 2012 Year-End Planning Opportunities

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There are substantial tax and estate planning opportunities available for individuals through the end of 2012, which could result in significant savings. But act before December 31, 2012!

Transfers Free of Gift and Estate Tax

The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (the "2010 Tax Act") applies to individuals dying or making gifts after December 31, 2009 and before January 1, 2013 and permits individuals to pass up to $5,120,000 free of federal estate and gift tax in 2012.

For transfers in excess of $5,120,000, whether occurring at death or by gift, a 35% federal tax rate will apply. On January 1, 2013, absent the passage of any legislation, estate, gift and generation-skipping transfer taxes will be due on transfers in excess of $1,000,000 (indexed for inflation) and the federal tax rate on those transfers will increase to 55%.

Current individual income and estate tax landscape for 2012 and 2013

The Supreme Court's decision to uphold the Patient Protection and Affordable Care Act means that tax increases on high-income taxpayers in the PPACA will take effect as scheduled in 2013. But also on the horizon is the scheduled expiration of the Bush-era tax cuts at the end of this year. (Those tax breaks disappear if Congress does not extend them.)

The table below compares tax provisions in place for individuals in 2012 with a "worst-case" scenario for 2013 under which the health care reform tax increases come into force and the Bush tax cuts are not extended.

tax table

Giving to Grandchildren

Significant tax savings also are available for gifts made to grandchildren in 2012. Generation-skipping transfers ("GST") refer to transfers made by a decedent or donor to a grandchild or younger generation, which skips his or her child. In 2012, only generation-skipping transfers made at death or during life in excess of $5,120,000 are subject to GST tax, which is in addition to the federal estate tax. The tax rate is currently 35%.

NY State Gift Tax Benefits

New York State imposes no gift tax on lifetime transfers, but it does impose a state estate tax. Thus, if New York State residents transfer $5,120,000 or less in 2012, they pay no federal or state gift tax, but if a resident dies with assets in excess of $1,000,000, that person's estate is subject to New York State estate tax. Therefore, New York State residents who are in a position to do so may want to consider making substantial gifts before the end of this year.

Not Subject to Gift tax or Lifetime Exclusion

In addition to the lifetime exclusion of $5,120,000, an individual may transfer $13,000 in any year to any number of individuals without paying any gift tax or filing any gift tax returns (this is referred to as the annual exclusion). Married couples can transfer up to $26,000 jointly each year. Payments of tuition and medical expenses made directly to the providers are another means of making additional gifts to an individual. Such payments are not subject to gift tax and are not subject to the lifetime exclusion limits or to the annual exclusion limits. However, reimbursements to an individual for those same medical and educational expenses do not fall within this exclusion.

Lessening Estate Tax Obligations

Another tax saving effect of making gifts during life is that both the assets and the appreciation on those assets are no longer a part of the donor's estate for estate tax purposes. [Because gifts retain the donor's basis and a step-up in basis only occurs when assets are transferred as a result of someone's death, it usually does not make sense to gift low basis assets.]

Portability of the Spousal Exclusion

In addition, portability, introduced as part of the 2010 Tax Act, allows a surviving spouse to use (during life or at death) the unused portion of his or her last predeceased spouse's applicable exclusion amount if the first spouse dies after December 31, 2010 and before January 1, 2013. (GST is not subject to portability, so any unused GST exclusion amounts cannot be used by the surviving spouse.)

Remember to Consider Downstate

As you and your advisors capably plan for the future, please remember to consider how a planned gift to Downstate can benefit both you and your loved ones -- while ensuring that Downstate's world-class excellence in education, research, patient care will continue far into the future.