It doesn’t seem like it was that long ago that everyone was joking that the incredibly wealthy needed to pass away in 2010 so that they could avoid any estate tax. But in reality, the 2010 “no estate tax safe harbor” didn’t really have an impact on the vast majority of us. However, we were, in fact worried about what was on the other side of 2010. The 2011 estate tax scenario was staged to result in a reversion back to the old estate tax regime. This meant that the estate tax exemption would go back to the $1M per person exemption which also had a top estate tax rate of 55%. This posed significant potential estate tax problems for many individuals and couples.
Luckily, in the waning days of 2010, Congress passed a bill allowing for a generous $2.5M per person estate tax exemption with a top tax rate of 35%. This bill relieved a lot of worries but was only a temporary fix that kicked the problem down the road another two years. This temporary fix is scheduled to expire at the end of 2012 and we are now faced with the same problems that we had at the close of 2010. Many clients are concerned about how to prepare for this scenario.
It remains to be seen what Congress will do in the face of the current estate tax law, which sunsets in a couple of months. They can choose to extend the current law, let it expire, or come up with a new estate tax law. No one can say with any certainty what action Congress will take but it would be wise to speak with an estate planning attorney to understand how the potential changes in the estate tax law can impact your estate plan and what your options are to plan around it.
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