Estate Planning Uncertainty in an Election Year
May 12, 2012 By The Law Offices of James A. Miller
Creating a comprehensive estate plan is a complicated undertaking and requires a thorough understanding of all the myriad tax laws that will impact your plan. This can be difficult under normal circumstances. In an election year, it becomes increasingly difficult as the fate of many tax laws is uncertain. This is not, however, the time to become complacent. Doing nothing could cost you a substantial amount in taxes.
On the other hand, it is also not the time to make rushed decisions for fear of losing a potential tax advantage. Be sure to discuss all the tax laws that are set to expire or change with your estate planning attorney. Among those laws are the following:
Estate Tax Exemption: Currently at an all time high of $5 million, the exemption is scheduled to drop back down to $1 million next year.
Gift Tax Exemption: Also currently at and all time high of $5 million and set to return to $1 million for 2013.
Estate Tax and Gift Tax Rates: Currently set at a maximum of 35%, both will revert to a maximum rate of 55% on January 1, 2013 absent action by Congress.
Payroll Tax Cut: Adds about $40 to the average worker’s take home pay. Congress extended the tax cut through 2012, but its future is uncertain.
Tax Rates: President Bush implemented a tax rate cut that is still in effect putting the rates at 10% - 35%. If they expire, individual tax rates will return to 15% - 39.6%.
Alternative Minimum Tax: The AMT was originally intended to prevent high income taxpayers from avoiding taxes; however, it was not indexed for inflation, resulting in more taxpayers being required to use the AMT over the years. A “patch” has been used by Congress each year to fix this, but the “patch” doesn’t extend to 2012 at this time. As many as 31 million taxpayers are expected to be impacted if another Patch is not forthcoming.
Tax Deductions and Credits: Numerous temporary deductions and credits have been adopted to help ease the financial stress of the recession. There is no guarantee that these will be extended.
Investments: The maximum rate for long-term capital gains could rise to 20% from 15% unless Congress acts before the end of the year. Stock dividends, currently taxed at a maximum of 15%, will also be taxed as ordinary income, with a top tax rate of 39.6%.
ABOUT THE AUTHOR: James Miller
Experienced estate planning attorneys Worcester MA of the Law Offices of James A. Miller estate planning and business planning resources to residents of Worcester MA.
Copyright The Law Offices of James A. Miller
More information about The Law Offices of James A. Miller
Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific technical or legal advice on the information provided and related topics, please contact the author.
Estate Tax Exemption: Currently at an all time high of $5 million, the exemption is scheduled to drop back down to $1 million next year.
Gift Tax Exemption: Also currently at and all time high of $5 million and set to return to $1 million for 2013.
Estate Tax and Gift Tax Rates: Currently set at a maximum of 35%, both will revert to a maximum rate of 55% on January 1, 2013 absent action by Congress.
Payroll Tax Cut: Adds about $40 to the average worker’s take home pay. Congress extended the tax cut through 2012, but its future is uncertain.
Tax Rates: President Bush implemented a tax rate cut that is still in effect putting the rates at 10% - 35%. If they expire, individual tax rates will return to 15% - 39.6%.
Alternative Minimum Tax: The AMT was originally intended to prevent high income taxpayers from avoiding taxes; however, it was not indexed for inflation, resulting in more taxpayers being required to use the AMT over the years. A “patch” has been used by Congress each year to fix this, but the “patch” doesn’t extend to 2012 at this time. As many as 31 million taxpayers are expected to be impacted if another Patch is not forthcoming.
Tax Deductions and Credits: Numerous temporary deductions and credits have been adopted to help ease the financial stress of the recession. There is no guarantee that these will be extended.
Investments: The maximum rate for long-term capital gains could rise to 20% from 15% unless Congress acts before the end of the year. Stock dividends, currently taxed at a maximum of 15%, will also be taxed as ordinary income, with a top tax rate of 39.6%.
ABOUT THE AUTHOR: James Miller
Experienced estate planning attorneys Worcester MA of the Law Offices of James A. Miller estate planning and business planning resources to residents of Worcester MA.
Copyright The Law Offices of James A. Miller
More information about The Law Offices of James A. Miller
View all articles published by The Law Offices of James A. Miller
Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific technical or legal advice on the information provided and related topics, please contact the author.
