Estate Tax Beyond 2012

The most common questions about the estate tax are “Will I have to pay?” and “How much?” Unfortunately, as of this post, these questions are impossible to answer. How much your estate will owe depends on the tax rate and the exemption amount the year that you die. Congress changes this amount from year to year. The estate of an individual who dies in 2012 will have to pay estate tax on assets over $5.12 million. If the individual’s entire estate is valued at less than $5.12 million, he or she is exempt from estate tax. If, however, the estate has over $5.12 million in assets, it must pay a 35% tax on everything over this threshold amount. Both the threshold amount at which estate tax is due and the amount taxed beyond this threshold has been in flux due to Congress.

Unless Congress acts, the exemption amount will drop to $1 million in 2013. This means that the estate of individuals who die in 2013 will pay a 55% tax on all assets over $1 million. Should this happen, it will obviously impact a large number of families. Both presidential candidates favor an increase in the exemption amount. However, unless Congress acts, the estate tax will impact many more Americans. For famililes that fall within this category, there are ways to reduce the impact of taxes on your estate with proper estate planning. For information on planning to reduce estate taxes, contact my office.

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