Now that the presidential election is over much of the national chatter has shifted to the “fiscal cliff” looming at the end of the calendar year when the terms of the Budget Control Act of 2011 are scheduled to go into effect. If Congress fails to reach a consensus on how to reconcile those provisions with the reality of the current fiscal situation in the United States, there will be far reaching consequences to taxing and spending across the board.
Under the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 Congress voted to extend the Bush-era tax cuts as they related to estate taxes. This avoided a sunset provision written into the Economic Growth and Tax Relief Reconciliation Act of 2001 which would have caused estate tax exemption amounts and tax rates to revert to the 2002 exemption level with a 2001 top rate. However, the law was only enacted to cover 2011 and 2012.
Under current law, in 2013 the estate tax will revert to the higher 2001-2002 levels, unless new legislation is passed altering that course. Estates valued at $1 million or more would again be subject to tax at progressive rates as high as 55% and portability (the ability of the surviving spouse to use up a deceased spouse’s exemption) would disappear.
Only time will tell what the outcome will be, but based on President Obama’s 2013 budget proposal, we can make a few educated guesses on what we may see:
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Topics: Budget Control Act of 2011, Bush-Era Tax Cuts, Estate Tax, Fiscal Cliff, Grantor Retained Annuity Trust, Tax Increases, Unified Credit Portability
Published In: Tax Updates, Wills, Trusts, & Estate Planning Updates
DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.
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