When lawmakers passed an extension of the federal estate tax last year, the exemption level was established at $5 million and the top rate at 35 percent for another two years. But that rate will expire at the end of this year, and estate planning attorneys are paying close attention to political developments in Washington, D.C., for signs of what 2013 will bring.
The first clear indication is the Obama Administration's recent release of its 2013 budget proposal, which calls for an increase in the estate tax. Under the $3.8 trillion budget plan proposed by the President in February, estate taxes would return to earlier levels, meaning a $3.5 million exclusion and a 45 percent maximum rate.
That represents one side of the political equation, and the structure of the estate tax will likely be a recurring issue in this election year. Many commentators expect that the exemption level is less likely to change than the tax rate.
However, experienced estate planning lawyers consistently advise clients that the ultimate effect of these changes is minor in comparison to the importance of putting an estate plan in effect as soon as possible. In other words: probate laws and tax laws are always subject to change, but the value of a smart and strategic estate plan is rock solid.
By sitting down to an honest conversation about assets and future ambitions, clients can learn about the best strategies to maintain financial security in the present and preserve a legacy for children, grandchildren and charitable giving.
Source: Wall Street Journal, What Will Tax Rates Look Like in 2013?, Laura Saunders, 9 January 2012