Concerns are rising among many in the financial and estate planning fields as the year winds down without any more clarity on the future of the estate tax. A recent post from Advisor One, for example, explained that the shrinking 2012 calendar means that there are less than three months until the "ticking estate tax time bomb" explodes.
Here's the reality: without Congressional action, on January 1, 2013 the current $5.13 million exemption level will drop to $1 million and the current 35% top tax rate will increase to 55%. In other words, many more families will face an inheritance tax and the bite will be much stronger than in the past. While it may seem like any time is a good time for estate planning (that is true), it is undeniable that taking proactive steps in the next few months to plan for possible estate tax changes may prove incredibly beneficial down the road.
As the Advisor One post explains, that need to plan is critical because changes are undoubtedly coming no matter who wins the elections next month. Each Presidential candidate has very different ideas about the estate tax. On top of that, of course, a President cannot make changes to these laws on their own. The final partisan make-up of both the U.S. House of Representatives and the Senate will play into any ultimate resolution. In addition, it is not just exemption levels and tax rates that are at issue. Different policymakers also have different ideas about what assets are or are not included in the "gross estate" which determines the amount to be taxed. For example, the President has suggested that he supports including certain assets held in grantor trusts in the estates.
The one thing that is certain is, without action, the exemption levels and rates will change at the first of the year. This is a reversion to the 2001 levels. Regardless of one's political ideas about these tax issues, this revision would undoubtedly mean that more and more local families would be impacted by these tax issues.
There is no simple way for any local family to understand how these issues might affect them. But it is a mistake to do nothing under the assumption that the future is uncertain. Real legal steps can be taken to best position the family to save money on taxes and seemlessly transfer assets to others, inlcuding the use of gifts. Community members throughout New York should take a moment to contact the lawyers at our firm for help.
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