Should the current estate tax law expire at year-end without Congressional action, nearly 15 million U.S. households will have a potential estate tax liability, according to new research.
Will the Bush-era tax laws expire after December 31, 2012? To expire or not to expire, that is the question.
When it comes to the “default” 2013 estate tax, some 12.5% of U.S. households may come under the estate tax axe, according to new analysis by LIMRA. These numbers were picked up and reported by LifeHealthPRO and reported in its article titled, “LIMRA: More than 1 in 8 U.S. households may owe estate tax in 2013.”
This change in the estate tax exemption limit scoops up a huge new group of taxpayers in its dragnet who otherwise might not have been subject to the estate tax axe. In fact, many in this new group of estate tax taxpayers have not previously found themselves at the top of the wealth pyramid. So, how is this possible?
If (or when) we fall off the fiscal cliff, the IRS will be forced to apply 12-year-old laws, and with them a 12-year-old estate tax exemption and its estate tax rates. In other words, the estate tax exemption will revert to $1 million from the current $5.2 million, and a 55% maximum estate tax rate will replace the current 35% rate.
Remember, it’s not just your bank account that the IRS counts against your estate tax exemption, but all of your assets, to include your home and life insurance death benefits.
Unfortunately, that’s just the tip of the tax iceberg. Not only is it absolutely vital to keep track of the law, but it is essential that you know the steps to take now to protect yourself and your loved ones in the event Congress and the White House fail to act.
This is an excellent time to schedule a year-end review with your estate planning attorney, so you can ensure your estate plan will be able to survive a tumble off the tax cliff.
Reference: LifeHealthPRO (September 27, 2012) “LIMRA: More than 1 in 8 U.S. households may owe estate tax in 2013”