There are large numbers of people in the United States who may be subject to the estate tax in 2013 unless they take action to mitigate their exposure. Under current laws the estate tax rate is going to go up from the 35% that is in place right now to 55%, and the exclusion is going to be reduced from $5.12 million to just $1 million.
The problem with taking action in light of these changes is that they may or may not actually take place. Yes, if things remain as they are right now and there are no legislative changes passed before 2013 the above scenario will hold sway. But a similar situation existed back in 2010.
During that year the estate tax was repealed due to provisions contained within the Bush tax cuts. That tax relief act was scheduled to expire at the end of 2010 and if it would have done so without any new legislation passing the maximum rate in 2011 would have been 55% and the exclusion would have been $1 million.
In the middle of December of that year a deal was struck in Congress that gave us a $5 million exclusion and a 35% top rate in 2011 with an increase in the exclusion to account for inflation up to $5.12 million in 2012.
So, it is possible that we could see new legislation that changes the estate tax parameters between now and 2013 like we did back in 2010. But of course there are no guarantees.
This is an interesting situation and it should be watched closely as the year progresses. If you have not yet discussed the matter with an expert, it would certainly be a good idea to take action and consult with an experienced Central New Jersey estate planning lawyer at some point during this year.
- Effective Planning for Single Seniors - October 1, 2023
- Your Guide to Navigating the Labyrinth of Trusts - September 28, 2023
- Paving the Way For the Future: An Estate Planning Guide for Millennials - September 24, 2023