Dec 032012

With the fiscal cliff looming, the House and Senate have each put forward tax bills that are designed to hold off some of the tax increases that will go into effect on January 1, 2013.  However, the Democrats and Republicans continue to battle over increased tax rates and government spending levels.

The estate tax is not addressed in the Senate bill.  As a result, the exclusion amount would go to $1 million, and the tax rate for amounts over $1 million will increase to 55%.

The estate tax provision in the House bill proposes extending the current provisions through 2013.  That means an exclusion amount of $5.12 million, and a tax rate of 35% for amounts over the exclusion.

Both House and Senate have passed tax bills that would put off big tax increases for millions – The Washington Post.

 December 3, 2012  Posted by at 10:45 am 1 Response »
Oct 312012

The article linked below provides an excellent analysis of why it is so essential to review or establish your estate plan before the end of the year.  The future of the estate tax is unknown, as I and many others have mentioned over the past several months.  Acting now is the only way to be prepared for what is to come in the next year.

Steven Abernathy and Brian Luster: Time for Succession Planning Is Running Out With Looming Expiration of Bush Tax Cuts.

 October 31, 2012  Posted by at 10:43 am No Responses »
Oct 292012

For 2012, estates valued up to $5.12 million are excluded from the estate tax.  Amounts exceeding the exclusion amount are taxed at a rate of 35%.  However, on January 1, 2013, the law establishing these amounts is set to expire.  After that the excluded amount will reduce to $1 million, and amounts over that are set to be taxed at a rate of 55%.

There is much speculation over whether Congress will act to extend the current rates.  And if Congress does act, there are a variety of scenarios that could take place.

  • The 2012 rates can be reinstated.
  • The 2012 rates can be reinstated, but indexed for inflation.
  • The 2013 rates can be left in place.
  • The 2013 rates can be left in place, and indexed for inflation.
  • The estate tax can be eliminated.
  • There can be a middle ground, where the exclusion amount is in the $3 million range, and the tax rate is 45%.

I believe the most likely is the last scenario.  However, I also believe it will not occur until January or February.  The current Congress is unlikely to act before the election (which is only a week away), and the results of the election will impact how successfully Congress can pass new legislation during the lame duck session.  I do not believe the estate tax will be eliminated, even with a Republican controlled House and Senate and a Republican president.

What thoughts do others have about the future of the estate tax?

 October 29, 2012  Posted by at 11:47 am 1 Response »
Sep 252012

Congress needs to find $1.2 trillion by the end of the year to avoid the potential sequestration cuts that are scheduled to take effect.  In other words, Congress needs to cut the Federal budget by $1.2 trillion.  However, to do so would require devastating cuts across the board, having a detrimental impact on all aspects of the government, including defense, national security, and core government functions.

According to the Congressional Budget Office, the estate tax increases that will go into effect on January 1st will potentially bring in $500 billion, over the next 10 years.  The Democrats want these increases to go into effect in order to avoid the massive cuts.  But the Republicans do not want these tax increases (and others) to go into effect.  With opposing positions, and the lack of compromise between the two parties evident over the past few years when it comes to significant budget decisions, it will be interesting to see how this plays out over the next three months.

The article linked below has a good description of the recent history of the estate tax and the impact of the increases that will potentially take effect on January 1st.

Restoring Estate Tax To Pre-Bush Level Could Make Huge Strides Toward Avoiding Sequestration.

 September 25, 2012  Posted by at 6:48 pm No Responses »