Yes, estate planning just got a whole lot simpler…at least for the next two years. Attacking the deficit was also put off until another day, as Congress and the President finally settled on a $5 million estate tax exemption per person (and a reduced rate of 35%). We were scheduled to snap back to the pre-Bush $1 million exemption and a 55% rate!
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A million dollars may still sound like a lot of money, but when you add up your home, IRA's, 401(k)’s, life insurance death benefits, etc., then toss in your business, any other real estate, a few cars and snowmobiles and whatnot, several family heirlooms, and your childhood comic book collection moldering in the attic, it can all add up. No need for most of us to worry now though. It is estimated that fewer than one-half of one percent of all estates will be liable for any federal estate tax.
But the politicians have failed to provide relief from one
thing that most serious commentators agree is a critical factor in tax policy: uncertainty.
It is true that we do not have the same moving target that we were
fretting about before: first the estate tax threshold grew every couple of years
to $3.5 million until
Yes,
just days before the New Hampshire Presidential Primary we will again have a
“debate” over the so-called “death tax.”
The politicians largely ignored this issue through virtually all of 2010,
while the likes of New York Yankee owner George Steinbrenner, Texas pipeline
tycoon Dan L. Duncan, Walter H. Shorenstein who was San Francisco's largest
landlord, and Mary Janet Morse Cargill, an heiress of the nation's largest
privately-held corporation - all billionaires many times over - died and left
estates which escaped taxation entirely. The
foregone federal tax revenues were substantial.
Most people would have been fired for screwing that up!
Do we really think they are going to deal with this issue any better
during a Presidential election season?
So enjoy the relative certainty and generous exemptions for the next two years. In the meantime, you may have an estate plan that is unduly complicated if it was created with the old version of the federal estate tax in mind. At the same time, be aware that the current exemption could evaporate and expose your estate to a substantial tax liability before the next Presidential inauguration. If the politicians drop the ball the next time, your estate could be taxed at the old rate of 55% on all assets in excess of $1 million!
Every estate plan ought to be reviewed periodically. Many of us have a good reason to check it in light of the new exemptions and perhaps to get rid of some unnecessary contrivances that were designed to avoid or reduce the tax under the old exemption, and many will want to look it over again as we get an idea of what is going to happen in 2013. Please click on the "Estate Planning" button to the left and contact me if you would like to review your estate plan.