As Yogi Berra once said, “it’s déjà vu all over again.” Just like the end of 2010, the tax relief act is due to sunset at the end of this year. What is known as the “fiscal cliff.” This will mean a drop in the estate tax exemption for U.S. Citizens and Residents from 5 million dollars to 1 million dollars. Keep in mind, that includes all assets in the estate including life insurance. Suddenly many more Americans will have taxable estates at a 55% tax rate.
Furthermore, part of the tax relief act included portability. Portability allows a surviving spouse to use the unused credit of a deceased spouse. Portability solved a problem for married couples that attorneys solved previously with AB Trusts. This too will disappear at the stroke of midnight December 31st unless the legislature addresses this in the next month and a half.
So where does that leave the average American? Well, as attorneys often advise, it is ok to hope for the best, but it is prudent to plan for the worst. If you have, or think you have, an estate in excess of 1 million dollars; meet with your estate planning attorney to determine the best course of action.
