After 12 years of uncertainty, the estate and gift tax laws were revised and made permanent. However, before we get too comfortable with these new provisions, let’s take a look at President Obama’s proposed 2014 budget. It looks like the newly-enacted estate and gift tax laws may be on the chopping block. The proposed budget set forth by the White House includes reducing the personal estate tax exemption amount to $3.5 million, without inflation adjustments, beginning in 2018. Gift tax exclusions would likewise be reduced, as well as some other inheritance-based taxes.
Back in January, the Federal estate tax laws were amended. Everyone now has a personal exemption amount of $5.25 million, subject to inflation. And, unlike over the previous decade, this law is permanent, causing millions of people to rely on it. Additionally, with “portability” a surviving spouse can use any portion of their spouse’s exemption amount that was not previously used, without having to place the money in a trust. As a result, some people may have gotten complacent about their estate planning needs.
The White House’s proposed budget now includes amending the recently enacted estate tax laws, lowering the exemption amount to $3.5 million. While this proposed changed would not be effective for several years, it creates a lack of certainty surrounding the estate tax laws.
Despite the lingering questions about the future of the estate tax, it is important to establish an estate plan based on current laws. Keep your plans updated in accordance with current law.