The Elder and Disability Law Firm, APC
Estate Tax Parameters that You Want to Be Aware of
One of the first things that you are going to want to determine when you are engaged in estate planning is whether or not your estate is subject to the federal estate tax. This levy can have a significant impact on the future of your family and it is something to take very seriously when you are crafting your legacy.
The dividing line between those who will be required to pay the tax and those who are exempt is the estate tax exclusion that exists at the time of your death. Throughout 2010 there was a great deal of uncertainty about the future of the estate tax. It was repealed for that year due to provisions contained within the Bush era tax cuts. But as the laws stood throughout 2010, when 2011 rolled around the estate tax was to return with an exclusion amount of $1 million and a maximum rate of 55%.
In the middle of December a tax relief measure made its way through Congress and it was signed into law by the president. This piece of legislation is now being called the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010, and it calls for a 35% estate tax rate and a $5 million exclusion. This means that if your estate is worth less than $5 million it is not subject to the federal estate tax at this time.
However, we are looking at an instance of "deja vu all over again" when the end of 2012 approaches. The above-mentioned tax relief act is going to expire at the end of next year, and when it does we will once again be facing a $1 million exclusion and a 55% maximum rate. So if you have every intention of living beyond the end of next year and your estate is worth in excess of $1 million the estate tax is something that is quite relevant to you and your family.