I wish I could predict the future. It is not easy being an estate tax advisor. Since 2001, we have had to make many guesses as to what the estate tax rules will be not only for the current year, but what will happen next year or in the future. 2012 is no different. Under the current law, the estate tax exemption amount is going to go from $5,120,000 in 2012 to $1,000,000 in 2013 and the highest tax rate will jump from 35% to 55%. This means that many taxpayers who would not have to consider the Federal Estate Tax if they died in 2012 may get caught in a very costly tax in 2013. Congress has acknowledged the issue, but has not done (nor may not want to) anything about it yet. Furthermore, since this is an election year, you can bet that nothing will get done until the end of the year (if at all).
What are Congress’s options?
- First, they could do nothing and allow the exemption to revert back to the $1,000,000 with a 55% rate.
- The second option is to extend things the way they are and keep the exemption amount and tax rate at 2012 levels.
- The third option is that Congress can come to a compromise and find a happy medium of those numbers.
Like I said earlier, I wish I could predict the outcome. However, it does not mean that we do nothing and sit around and wait for something to happen. Instead, now is the perfect time to create an estate plan or update an existing one. The key is flexibility. Your plan should be flexible enough to take advantage of any potential Congressional outcome. There are tremendous opportunities to take advantage of the estate tax rules, both now and into the future. Don’t wait until it is too late.
Need help creating or updating your estate plan? Contact our Cleveland and Akron tax professionals at 440-449-6800.