The estate tax looms large when you are planning your estate and it can erode your assets considerably if you are not properly prepared. The first thing to take into consideration is whether or not the overall value of your estate exceeds the estate tax exclusion, and the reality is that this is easier said than done because the exclusion is a moving target.
At the present time the estate tax exclusion is $5 million and the rate of the tax is 35%. This framework is in place as a result of the passage of a piece of legislation back in December of last year that is now being called the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 (“TRA 2010”). So as things stand right now your heirs will not be required to pay the estate tax if your assets do not exceed $5 million in total value.
However, it is important to recognize the fact that these above stated parameters are not permanently etched in granite. TRA 2010 is going to sunset at the end of 2012. If this takes place without any new legislation passing between now and then that impacts the estate tax parameters and the window of tax relief that is presently open will be abruptly slammed shut.
As the laws currently stand the estate tax exclusion will revert to the 2002 level of $1 million and the rate will go back to the 2001 figure of 55% in 2013. It may be hard to wrap your head around a federal levy that sits poised to consume more of the taxable portion of your estate than it leaves behind to your loved ones but this is the law as it stands today.
The good news is that there are steps that can be taken to mitigate your estate tax exposure. If you would like to explore them in detail, simply take a moment to get in touch with a highly qualified estate planning attorney to arrange for an informative initial consultation.
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.