Time is Running Out!
Congress has yet to take action following the Presidential election in early November. There were many hopes that congress would promptly take action regarding the estate tax. Absent some sort of Congressional action, as of Jan 1, 2013 the rates and exemptions will all change, resulting in a significantly higher estate tax. Thus far Congress has been unable to move forward with any concrete bills, despite a national focus on the tax system and potential reforms.
Under the current law, the federal gift tax, estate tax, and generation-skipping transfer (“GST”) tax exemptions and rates are unified. The federal estate tax exemption and the federal gift tax exemption is $5.12 million in 2012, and the estate tax rate is 35%, as is the gift tax rate. (See the previous post for a more in-depth look at the current and coming estate tax systems)
As the laws currently stand on January 1, 2013 the current law will expire and estate tax rates will change. The exemption rate will drop to $1 million. Additionally the estate tax rate will increase from the current 35% to 55%.
It is impossible to guess where the estate tax system will end up in 2013. Still, is never too soon to begin planning your estate. There are tools and plans that we can use make your estate plan adaptable to the changing laws. President Obama has proposed some changes that would limit or prohibit some estate planning tools. So there is a possibility that if you wait too long, you will have lost the window to be grandfathered in under the current, more favorable trust laws. Some proposals advocate “mega-gifts” in the 2012 year, taking advantage of the $5.12 million exemption, before it reverts to the $1 million.
If you have any questions, or any interest in taking advantage of the current estate tax laws, contact us soon!
Disclaimer: The information on this blog is provided for general informational purposes and is not legal advice. Information contained in this blog, the comments, or any correspondence with the author or others do not create an attorney-client relationship and are not a substitute for professional legal advice from a licensed attorney in your jurisdiction.