What will happen to estate taxes in the coming years?
It’s a question plaguing many estate planners these days. With the current set of estate tax rules set to expire at the end of the year, there is much uncertainty.
And it looks like Capitol Hill is continuing with the uncertainty. While the Senate Democrats proposed the extension of the Bush era tax cuts through 2013, they dropped the language addressing the estate tax, reports Bloomberg Businessweek.
Federal estate tax is imposed on the assets of a deceased, assuming that the combined assessed value of the assets is over the exclusion amount.
The current estate tax law allows a $5.12 million per person exclusion, with the highest tax bracket paying taxes at a 35 percent rate, writes Thomson Reuters Accounting Web.
Assuming Congress doesn't act on estate tax, there would be change in 2013, with the exclusion falling to $1 million and a 55 percent tax rate at the highest bracket. This would hit an estimated 50,000 estates in 2013, according to research from the Tax Policy Center. At the current rates, an estimated 4,000 estates would be hit with estate tax.
The original language in the Democratic legislation called for a maximum tax rate of 45 percent for estates over $3.5 million. According to the Tax Policy Center, this would result in the taxation of an estimated 7,000 to 7,500 estates.
With the current uncertainty, estate planners are having to work within the parameters they have. There may be an impending heavy workload for some, if more estates are subject to estate tax. Meanwhile, many estate planning lawyers will have to plan preemptively by including conditional provisions addressing potential changes in estate tax law.
Nevertheless, people who estimate that their estates may fall over $1 million should plan accordingly and talk to an estate planning lawyer sooner rather than later.
- Search Directory of New York Estate Planning Lawyers (FindLaw)
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