It has been said that the only thing constant in life is change, and change can certainly be good. When it comes to the federal estate tax, we tend to see frequent change and the uncertainty such frequent changes bring is not always welcomed.
There have been a lot of changes to the estate tax parameters over the last few years. In 2009, the maximum estate tax rate was 45% and the exclusion was $3.5 million. The estate tax was repealed for 2010. However, on December 17, 2010, Congress brought the estate tax back with yet another new law: the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (“TRA 2010”). TRA 2010 changed the amount that could pass without estate tax to $5 million per person for 2010 and 2011 with a maximum estate and gift tax rate of 35%.
In 2012, there will be a slight change in the estate tax exclusion to allow for inflation. The exclusion will be $5,120,000 in 2012, but at the end of the year the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 is going to expire. When it does we are going to see some more very significant changes.
It should be noted that current laws could be altered before 2013 arrives, hoewever if things do remain as they are right now the estate tax exclusion is going to be a mere $1 million in 2013 and the maximum rate of the tax is going to skyrocket to a jaw-dropping 55%.
When you look at these percentages you can see just how heavily this federal levy can impact future generations of your family. To take steps to minimize your estate tax exposure, take action right now and arrange for a consultation with a licensed, experienced, and savvy estate planning attorney.
Roy W. Litherland has practiced law in the San Jose and Santa Cruz areas for over 35 years. He is certified by the California State Bar Board of Legal Specialization as a legal specialist in Estate Planning, Trust and Probate Law. In addition to his extensive legal background, Roy was previously licensed as a CPA. He is a member and designated Fellow of the American Academy of Estate Planning Attorneys and is a member of the National Academy of Elder Law Attorneys.
Roy has an undergraduate degree in accounting from Indiana State University, and a Juris Doctor degree from Indiana University. He graduated from law school in 1973. Roy was a member of the legal fraternity of Phi Delta Phi and president of the local chapter at Indiana University Law School in 1972-73. In law school he was a recipient of the Dean Faust Award and received awards and honors in income taxation and estate and gift taxation.
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