Time passes quickly, and most people are firmly embedded in the routine of their day-to-day lives. So, you may not be aware of things that are taking place in Washington that could render your existing estate plan inadequate. With this in mind, we would like to raise awareness about the significance of this calendar year.
Whether or not your family is going to be exposed to the estate tax, and how much they will potentially have to pay, varies depending on the parameters that are in place at any given time. At the moment, the estate tax exclusion is $5.12 million and the top rate of the tax is 35%. So if you did nothing to gain estate tax efficiency, the entirety of your estate that exceeds $5.12 million in value would be subject to this 55% federal levy.
The way the laws currently stand, the above parameters will change at the end of this year. Upon the expiration of the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010, on New Year’s Day the maximum rate of the estate tax goes up to 55% and the exclusion will shrink down to just $1 million.
2012 is an election year, so you can be sure that the debate will rage about a possible tax cut extension. There’s a big difference between a $1 million exclusion and a $5.12 million exclusion, and a significant difference between 35% and 55%, so how it plays out could have an enormous impact on your legacy.
If you would like to explore the matter further, don’t hesitate to pick up the phone to arrange for a consultation with a highly qualified and experienced Los Gatos estate planning lawyer.