The estate tax parameters were newly defined after the enactment of the American Taxpayer Relief Act of 2012.
When you look back on the situation that was described as a path toward the fiscal cliff this precipice represented a plunge into a sea of tax increases and spending cuts. One of the taxes that would have went up was the estate tax.
Under the laws as they existed throughout 2012 the top rate of the estate tax was going to rise to 55% in 2013 while the exclusion was reduced to $1 million.
This uncertainty was problematic for those who want to make sure that their estate planning efforts are always up-to-date.
At the 11th hour a deal was struck between lawmakers, and as a result we have more favorable parameters to work with in 2013. The estate tax exclusion is $5.25 million this year, and the maximum rate is 40%.
Theoretically these parameters are supposed to be permanent, with the 40% rate remaining constant while the exclusion is adjusted for inflation annually.
However, news is circulating about the 2014 budget that is being proposed by President Obama. This budget includes an increase in the estate tax that would start in 2018.
At that time the rate of the estate tax would go up to 45% while the exclusion was reduced to $3.5 million. The lifetime gift tax exclusion would go down to $1 million. These were the parameters that were in place back in 2009.
You never know about the future of the estate tax even when you hear words like “permanent” tossed about. This is why it is wise to view estate planning as a dynamic and ongoing endeavor.
Mr. Kraft assists clients primarily in the areas of estate planning and administration, Medicaid planning, federal and state taxation, real estate and corporate law, bringing the added perspective of an accounting background to his work.
Latest posts by Paul A. Kraft, Estate Planning Attorney (see all)
- If a Beneficiary Dies During Probate What Happens to the Inheritance? - September 18, 2019
- Is Your Power of Attorney Powerless? What to Do When a Third Party Won’t Honor an Agent’s Authority - September 11, 2019
- Are There Different Types of Special Needs Trusts? - September 4, 2019