I remember back in late 2001 when they came up with the major tax changes of 2002. I suppose those can be categorically called the “Bush Tax Cuts.” It seemed like the ultimate politician’s agreement… a temporary fix to the estate and gift tax laws.
How can an estate planning attorney plan with a temporary fix? It made no sense. Of course that temporary fix was set to be about 8 years through the end of 2010. You may recall the government set in place a gradual increase of the estate tax exemption each year or two from $1,000,000 to $1,500,000… and up to 2010 when there would be no estate tax. Interesting side note is that throughout that time the gift tax exemption stayed at $1,000,000.
Throughout those years most experts confidently said that the government would never let the estate tax go away in 2010. Oh ya, and then 2010 got here and billionaires died and paid ZERO estate tax.
So at the end of 2010 the government came up with a two year temporary fix. This one good until December 31, 2012. The current estate tax exemption is $5.12m but that’s set to go to $1,000,000 on January 1, 2013. Will it? This is of course part of the fiscal cliff.
We are now less than 2 months away from the fiscal cliff and the experts are now suggesting maybe Congress will come up with a 6 month extension of the estate tax exemption. Then what?
The key is none of us know what the estate or gift tax exemption will be. However, we can tell you what it is TODAY. As of today, November 8, 2012, you can give away $5,120,000 tax free during life or at death (but not both).
If your estate is anywhere close to this you probably should meet with an estate planning attorney quickly.