Should the current estate tax law expire at
year-end without Congressional action, nearly 15 million U.S. households will
have a potential estate tax liability, according to new research.
Will the Bush-era tax laws
expire after December 31, 2012? To expire or not to expire, that is the
question.
When it comes to the “default”
2013 estate tax, some 12.5% of U.S. households may come under the estate tax
axe, according to new analysis by LIMRA. These numbers were picked up and
reported by LifeHealthPRO and
reported in its article titled, “LIMRA: More than 1 in 8 U.S. households may
owe estate tax in 2013.”
This change in the estate tax
exemption limit scoops up a huge new group of taxpayers in its dragnet who
otherwise might not have been subject to the estate tax axe. In fact, many in
this new group of estate tax taxpayers have not previously found themselves at
the top of the wealth pyramid. So, how is this possible?
If (or when) we fall off the
fiscal cliff, the IRS will be forced to apply 12-year-old laws, and with them a
12-year-old estate tax exemption and its estate tax rates. In other words, the
estate tax exemption will revert to $1 million from the current $5.2 million,
and a 55% maximum estate tax rate will replace the current 35% rate. Yes, that’s
a quite a low blow.
Remember, it’s not just your
bank account that the IRS counts against your estate tax exemption, but all of
your assets, to include your home and life insurance death benefits.
Unfortunately, that’s just the
tip of the tax iceberg. Not only is it absolutely vital to keep track of the
law, but it is essential that you know the steps to take now to protect
yourself and your loved ones in the event Congress and the White House fail to
act.
This is an excellent time to
schedule a year-end review with your estate planning attorney, so you can
ensure your estate plan will be able to survive a tumble off the tax cliff.
For more
information on estate planning and elder law issues, please visit our website, sign up for our free monthly e-newsletters
or read our past blog posts.
Reference: LifeHealthPRO
(September 27, 2012) “LIMRA: More than 1 in 8 U.S. households may
owe estate tax in 2013”