The Uncertainty with the Estate Tax Exemption Amount
Since 2001, the estate tax exemption amount has increased every year, until 2010, when there was no estate tax. If there ever was a good year to die, 2010 was it and George Steinbrenner (owner of the New York Yankees) timed it just right. By dying in 2010 his estate saved over $500 million in estate taxes.
The question on everyone's mind now is what will happen in 2013? Our best guess is that with the way our friends in Washington have been running things, or maybe not running things, the estate tax exemption amount will drop to $1 million with a maximum tax rate of 55% of all assets over the $1 million limit. We cannot be certain that this is what is going to happen, but with the deficits this country is running, Congress really only has two options: 1) either decrease spending, or 2) increase taxes. Last time we checked, Congress has not stopped spending our tax dollars, which leaves us with one option on the table- increase taxes. One way to easily increase taxes for Congress is to simply let the exemption lapse to the $1 million level that existed prior to the Economic Growth Tax Reconciliation and Relief Act of 2001.
Accumulating an estate that exceeds $1 million is very easy to do these days, especially considering that the IRS considers almost everything you own as part of your estate for estate tax purposes. Items such as your bank accounts, your home, your retirement accounts, and even your life insurance policies are included in your estate for estate tax purposes. For every dollar over $1 million that makes up your estate you are potentially paying fifty five cents on the dollar to Uncle Sam. Not a pretty picture to say the least.
We strongly believe that the assets one accumulates during their lifetime should be going to whom they want, when they want, how they want, with the least amount of interference from the courts and government as possible. There are ways to protect your estate from the estate tax and other pitfalls, such as probate. If you are interested in learning more about these topics, please call our law firm for a free consultation with one of our Estate Planning Attorney's.