The end of the near is moving slowly toward us. While there is nothing Congress can do to stop the passage of time, it can act to stop big, impending changes to estate and gift tax laws that are scheduled to be implemented on January 1, 2013.
Many Lee County families aren't waiting to see if Congress acts. They're creating trusts right now and making financial gifts to loved ones as well.
The reason for the flurry of financial activities related to these taxes? The exemptions for both will plummet from the current $5.12 million to $1 million on the first day of the new year -- unless Congress acts to prevent it.
That means any estate valued at $1 million or more could be subject to the estate tax and a top rate of 55 percent next year. The current top rate is 35 percent.
A spokesperson for one prominent accounting firm told the Associated Press, ''People are saying 'Wait a minute, this is really going away. I need to do something before the end of the year.'''
According to Congress' Joint Committee on Taxation, the new tax rates would affect approximately 55,000 estates in 2013.
One estate planning attorney in New Jersey noted that it's hard at all for people to have more than $1 million in assets. Think of a family with a home and a vacation home, for instance. They could easily qualify for the new tax rate, as could small business owners and others.
Here's how drastic the change could be: think of a married couple with an estate of $3 million. The tax on that estate, as it is passed on to their heirs, could be as much as $945,000 next year. The tax on it this year? Zero.
Estate and gift taxes are complex. It makes sense to discuss these matters with an experienced estate planning and trust administration attorney before making decisions.
Source: Boston.com, "Coming changes in estate, gift taxes stir 'frenzy'," Oct. 24, 2012
- Our Lee County firm assists in trust planning and administration. For more information, please visit our estate planning page.