Perhaps the most important matter to consider that is outside of your control when you are planning your estate is possible exposure to the federal estate tax.
One of the reasons why there are a lot of people who do not think that the estate tax is fair is because of the fact that everyone is not required to pay it. If it is so necessary for the functioning of the government, why is it selectively imposed? And how can you fairly create an exemption amount and then change it on an ongoing basis making some people pay heavy taxes while others who happened to die during a different year with the same amount of money were asked to pay nothing?
These are good questions, but reality is what it is and the only thing that you can do is be pragmatic about understanding the lay of the land and subsequently take the appropriate action to gain estate tax efficiency.
At the moment the estate tax exclusion is $5 million, and the maximum rate is 35%. However, before you breathe a sigh of relief, you would do well to understand the fact that these parameters are in place due to provisions contained within the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010.
This act is going to expire at the end of next year. At that time the rate of the tax is going up to 55% and the exclusion is going down to $1 million. Of course Congress could pass a measure that changes these parameters as they did at the end of 2010. But, considering the federal debt issue and the call for considerable spending cuts reducing revenue by extending or even advancing estate tax relief may not be well received by certain factions.
Regardless of your politics, if you are planning for the future this is a matter to keep on your radar on an ongoing basis.
- Challenging a Will in Indiana Based on Lack of Testamentary Capacity - September 21, 2023
- The Spendthrift Beneficiary: Protecting Assets from Reckless Spending - September 19, 2023
- How Do I File a Complaint Against a Nursing Home in Indiana? - September 14, 2023