One reason some people visit a lawyer to assist in estate planning is to avoid the punitive elements of America’s estate tax, also known as the death tax. Currently, the estate tax applies to relatively few Americans, but that may change in 2013.
As it stands now, all estate income up to $5.12 million is exempt from the 35% estate tax. What does that mean? Let’s say that you leave an estate of $6.12 million to your family. The first $5.12 million is not subject to the 35% estate tax. Anything beyond that – in our case, $1 million – is subject to the estate tax.
If Congress does not act, however – and, of course, it’s impossible to predict what Congress will do – the estate tax will revert back to previous levels. This means that only the first $1 million of the estate tax would be exempt, and the estate tax rate itself would jump to 55%.
What does this mean for you?
First off, such a tax would apply to a much greater percentage of Americans. Although most Americans don’t have more than $5 million in their estates, quite a few have more than $1 million when we factor in things like homes, businesses, personal possessions, retirement annuities, life insurance proceeds, etc. Second, the tax would become far more punitive in its jump from 35% to 55%.
So let’s say your estate is worth $1.5 million. Everything beyond the first $1 million – in this case, $500,000 – would be subject to a 55% estate tax.
Again, it’s impossible to predict what Congress will do, but the potential for changes in the estate tax is something you should consider if you are developing or revising an estate plan.
Igor – Happy to hear from you.
We’ve been meaning to have wills done for both Garfield & myself. Please contact us at your convenience (303 252-8869)regular mail(13385 Race, Thornton, Co 80241)or email me more information regarding types of wills, trusts, etc. and an approximate fees list. Take care, Gloria