What the New Estate Tax Law Means for You
It was hard to escape talk of the dreaded “fiscal cliff” these last weeks and months. As you probably know, Congress finally took action – at the 11th hour – by enacting the American Taxpayer Relief Act of 2012 (the 2012 Tax Act). The 2012 Tax Act makes several important revisions to the tax code that will affect estate planning for the foreseeable future. What follows is a brief description of some of these revisions – and how they might affect you:
- For more than ten years, we have been planning with uncertainty under legislation that contained built-in expiration dates and frequently changing limitations as to how much of an estate Americans could give away either during their lives or upon death before being subject to transfer taxes. Under the 2012 Tax Act, we now have a number that is not scheduled to change. While “permanent” in Washington only means that this is the law until Congress decides to change it yet again, at least we now have more certainty with which to plan.
- Americans can now transfer through lifetime gifts or inheritance up to $5 million before being subjected to transfer taxes. For most people, this will eliminate the need to do extensive tax planning as part of an estate plan. The $5 million number will be adjusted annually for inflation. For those with large estates, this means that the opportunity to transfer large amounts during lifetime or at death tax-free will continue for the foreseeable future.
- Married couples can take advantage of these higher exemptions and, with proper planning, transfer up to $10+ million through lifetime gifting or at death.
- The tax rate on estates larger than the exempt amounts increased from 35% to 40%.
For most Americans, the 2012 Tax Act has removed the emphasis on estate tax planning and put it back on the real reasons we need to do estate planning: taking care of ourselves and our families the way we want. This includes:
- Protecting you, your family, and your assets in the event of incapacity or death;
- Ensuring your assets are distributed the way you want, without court interference;
- Protecting your legacy from irresponsible spending, a child’s creditors, and from being part of a child’s future divorce proceedings;
- Providing for a loved one with special needs without losing valuable government benefits; and
- Helping protect assets from creditors and frivolous lawsuits.
Now is a great time to get started protecting your family’s future. Contact Temkin Law today to schedule your complimentary Estate Planning Session. We’d love to hear from you!
by Wendi Temkin – Attorney at Law