Monday, January 9, 2012
Inflation has caused the federal estate tax exemption to increase from $5 million in 2011 to $5.12 million in 2012. With portability, this number can reach as high as $10.24 million. Additionally, many states have made changes to their death taxes, causing some taxpayers with assets totaling over $5.12 million to owe combined state and federal death-related taxes as high as 50%. If Congress fails to act, these taxes could increase in 2013 as the exclusion is set to drop to $1 million and the estate tax is set to return to 55%.
With so many possible changes surrounding death taxes, estate planners should talk seriously with clients about how the federal and state death taxes could affect their estates. Additionally, estate planners should research the death taxes for states in which a client owns real property as the real property might be subject to the state's death tax.
For more information on federal and state death taxes, see Gail Liberman, State of Affairs, Financial Advisor Magazine (January 2012).
Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.