There are many issues presently facing the American people. Jobless rates not declining as much as we’d like; the economy taking longer to improve than we’d all prefer; the fiscal cliff. But, what many people have overlooked is the imminent changes in the estate and gift tax laws set to take effect January 1, 2013.
Unless the lame duck Congress acts, the federal estate and gift tax exemptions are set to expire at the end of this year and revert back to the 2001 levels, which are much lower than they are now. Additionally, the estate tax rates are set to rise come the first of the year. This means you only have a few short weeks left to get your plan in place. It takes time to set up a full estate plan and waiting much longer, could mean you run out of days left in 2012.
This year, the estate tax and gift tax exemption for individuals is $5,120,000.00 and a top tax rate of 35%. On January 1, 2013, the estate tax and gift tax exemptions for individuals will drop to $1,000,000.00 and the top tax rate jumps to 55%! That’s a huge difference. Can you see why it’s so important to plan for the future?
So, is the lame duck Congress going to act? Probably not. They’re probably going to be spending their time keeping the tax breaks on income and investments in place. But, what might happen is that the new Congress will act on this and make it retroactive to January 1, 2013. What most certainly will not happen is the rates staying the same or going up. Most definitely, the estate and gift tax exemption will go down but it will be a compromise, probably somewhere around $3,500,000.00. Congress will probably make a similar compromise on the top tax rate.
But, do you really want to wait for Congress to act? I didn’t think so. Call your attorney and get your estate plan set up.