What does the reelection of President Obama mean for Estate Tax?

The reelection of President Obama has brought the topic of estate tax back into the limelight.

For 2011 and 2012, we have had the largest federal estate tax exemption in 50 years (currently at $5.12 million) and the lowest federal estate tax rate (at 35%).   The present law is set to expire at the end of 2012. Some say the estate tax will revert back to the 2001 exemption rate of $1 million and a tax rate of 55%, while others believe the law will stand at the present exemption and tax rate.
Unfortunately, there is no clear view of where things may be headed concerning the estate tax and taxes. What we do know is that the items listed below will be changing on January 1, 2013, without Congressional action:

  • The “Bush tax cuts”, which had been extended by TRA 2010, will expire;
  • There will be across-the-board spending cuts to most discretionary programs, per the Budget Control Act of 2011;
  • The Alternative Minimum Tax fix will sunset and return to tax year 2000 AMT thresholds;
  •  Federal unemployment benefits extension will expire and
  • The 2% Social Security payroll tax “holiday;” will also expire.

Most of these changes will have an immediate impact on the growth of the economy, and may throw the economy temporarily back into recession.

The final disposition of the Federal Estate Tax law will be important to you and the planning you have done under your will and/or trusts. Farr Law Firm, P.C. recommends that you maintain your vigilance on this topic so you can ensure that your estate plan reflects the most current law and you get the most out of any changes that are made at the end of 2012.  For assistance, call the Law Firm of Evan H. Farr, P.C. at 703-691-1888.

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About Evan H Farr, CELA, CAP

Evan H. Farr is a 4-time Best-Selling author in the field of Elder Law and Estate Planning. In addition to being one of approximately 500 Certified Elder Law Attorneys in the Country, Evan is one of approximately 100 members of the Council of Advanced Practitioners of the National Academy of Elder Law Attorneys and is a Charter Member of the Academy of Special Needs Planners.

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