Friday, September 28, 2012
When it comes to estate tax, a recent study indicates there are three proposals that Congress is most likely to consider: (1) Let the estate tax law revert back to $1 million and 55% maximum tax; (2) extend the current law with $5 million exemption and 35% maximum tax; or (3) enact a compromise of $3.5 million exemption and 45% maximum tax.
If Congress does not take action regarding the estate tax by the end of the year, 15 million U.S. households will owe estate tax. While only 4.4 percent of households have financial assets greater than $1 million, other assets are included in estate tax calculation. Households can use life insurance proceeds on the deceased to pay estate tax, but the LIMRA analysis indicates that 55% of these households do not have enough coverage to pay the tax.
If Congress extends the existing law, 2.4 million households would have a potential estate tax liability. 43% of these households do not have enough coverage to pay the tax.
If Congress agrees to a compromise of $3.5 million exemption and 45% tax rate, 3.6 million households would have a potential estate tax liability. 53% of households do not have the coverage to pay this tax.
See Warren Hersch, LIMRA: More Than 1 in 8 U.S. Households May Owe Estate Tax in 2013, LifeHealthPro, Sept. 27, 2012.
Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.