Congress is getting ready to recess until rafter the November elections. Meanwhile, there is much unfinished business involving the Bush-era tax cuts that are set to expire at the end of 2012. Currently, there are no measures that will address any of these provisions.
Estate taxes in 2012. For 2012, individual estates are entitled to an exemption of $5.12 million. Amounts in an estate exceeding that amount are taxed at a 35% rate. This exemption amount has gradually increased over the past 10 years.
Estate taxes in 2013. Beginning January 1, 2013, the exemption amount for individual estates will revert to $1 million, with excess amounts being taxed at a 55% rate. Those are the same rates that were in effect in 2009. These rates are changing because the current estate tax laws are expiring at the end of 2012.
Congress may act to prevent the expiration of the current laws. However, time is quickly running out. They are about to recess for 6 weeks in advance of the November elections. There will also be a Thanksgiving recess and a winter recess.
It is possible that the next Congress will convene in January without any of these tax matters having been addressed. If that is the case, they will have to decide whether to pass new laws, whether these laws should be retroactive, and how to treat estates created between January 1, 2013, and the date any new law is enacted.
The best way to get ahead of Congress is to establish a personal comprehensive estate plan. Don’t wait to see how the law evolves. Act to protect your interests and your family before it is too late.