As everyone is aware, we have recently been going through a fiscal crisis in Washington regarding the debt ceiling. A somewhat shaky compromise has been reached, but everything has not been decided by a long shot.
Everyone concerned seems to be in agreement about one thing: spending must be reduced. And indeed, a spending reduction mandate came out of the agreement to raise the debt ceiling. However, where the cuts will come from is a matter that will be hashed out by a bipartisan committee.
The area where there is disagreement involves whether or not it is necessary to increase revenue while reducing spending to get the federal deficit under control. Those who were in favor of revenue increases did not get their way in this agreement to raise the debt ceiling. However, the notion that taxes should be raised on the wealthiest Americans so that this revenue can be used to reduce the debt is not dead in the water. And, as things stand right now an estate tax increase is actually already scheduled.
If there are no changes to the laws as they stand at this time, a whole lot more people are going to be subject to the estate tax in 2013. And, their heirs will be paying the government a higher percentage of the taxable portion than they are allowed to keep. Unless another extension of the Bush era tax cuts is passed in the meantime, the estate tax exclusion is going to be just $1 million and the maximum rate of the tax is going up to 55% when the tax relief act that was passed at the end of last year expires at the end of next year.
Given the fact that many people in Washington wanted revenue increases that they did not get during the recent debt ceiling negotiations, another extension of the Bush era tax cuts may be a tough sell this time around. It would be a good idea to watch this matter closely if the value of your estate is more than $1 million and be prepared to discuss adjustments to your estate plan with your estate planning attorney.
- Important Subjects to Discuss with Your Estate Planning Attorney - January 23, 2023
- Planning for the Possibility of Dementia - January 20, 2023
- How to Prepare for Retirement - January 17, 2023