When you hear estate planning attorneys saying that it is important for the typical layperson to have legal representation you can take a cynical approach. You may assume that they are overstating the importance of legal counsel. But the fact of the matter is that the more you know about the estate tax you can see why you really need to retain an attorney and keep in touch on an ongoing basis to protect the interests of your family.
Not everyone has to pay the estate tax. You may have heard that it is a tax that is imposed only on “rich” families, and whether or not this is really true depends on your definition of the word “rich.” If you are under the impression that only billionaires are subject to the tax, you should think again because at the present time only the first $5 million of your estate passes to your loved ones tax-free. And, if there is no additional tax relief legislation passed between now and then, the exclusion is going to be reduced to just $1 million at the beginning of 2013.
The way that the estate tax exclusion moves around so frequently is something that estate planning attorneys can help you react to, but it can get complicated. For example, because of provisions of the Bush era tax cuts the estate tax was repealed throughout much of 2010. But during the middle of December, a new tax relief act was passed that is now called the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010.
This act reinstated the estate tax retroactively to the beginning of 2010 with the $5 million exclusion and 35% rate that holds right now. But there were concerns about the constitutionality of a retroactive estate tax, so the executor of the estate of someone who passed away in 2010 can opt out of the tax by filing IRS Form 8939.
So, was the estate tax really repealed in 2010? The answer is yes and no, and this kind of thing underscores why it is a good idea to have legal representation to guide you as changes to the laws come down the pike.
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.