November 20, 2012
Estate Tax Boomerang?
As I have previously discussed, many are wondering about whether Congress will act in time to prevent the Bush tax cuts from expiring. If the tax cuts expire, the lifetime estate and gift tax exemption will fall to $1 million and the estate tax rate will increase to 55%. Some experts think that this outcome is likely, but there are those who believe that while Congress will fail to act in time, they will likely pass some form of estate tax relief retroactively. As I have previously discussed, these other experts still believe that the estate tax provision that provides for portability will likely to continue through 2013.What is still at risk, however, are the gifts that were made in preparation of the estate tax exemption falling to the $1 Million mark. It is important to remember that from the estate planning perspective, it is better to pass property as a lifetime gift than allow the property to pass through the probate process. The reason for this is because it allows the wealthy to pass assets that are likely to appreciate in value. After the gift is made, any appreciation is still tax-free for the person making the gift. The problem for these people is that President Obama's financial proposals for the next year do not look like it will be too favorable to the wealthy. If a person would like to examine the Green Book, he or she can download it here.
This does not apply to the vast majority of people. These people are more likley use the annual gift tax exemption, which is set to increase to $14,000 starting next year.
See Deborah L. Jacobs, Will The Estate Tax Boomerang As We go Over the Fiscal Cliff?, Forbes, Nov. 15, 2012.
Special thanks to Deborah L. Jacobs (Senior Editor, Forbes Media) for bringing this article to my attention.
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