The State of the Estate Tax, 2011
First the good news: Very few people are subject to the estate tax, the tax imposed on a person at death.
If your estate is worth less than $5 million, relax. You have no need to worry. Only 8,600 estate tax returns are projected to be filed in 2011 out of over 2.4 million people who will die, so that means that less than 1% of estates will have to worry about paying estate taxes. Still, politicians fan the fear of estate taxes and many people worry about their tax liability, so it pays to know the facts.
Now the bad news: the law will change in 2013 and starting then, all estates worth more than a measly $1 million will be subject to estate tax. You might think that you are still safe, but when you add in the value of your home, your life insurance (yes, it counts), your retirement plans and your investments, you might be in for a shock. Estimates are that over 115,000 estates will then be subject to estate tax.
What can the average family do to protect themselves from losing perhaps half their wealth to estate taxes? The easiest thing to do is to make an appointment with an attorney, ideally an Estate Planning attorney. Your attorney will discuss with you the options available based upon your age, your family situation, your potential for future income and your specific assets. There are many moving parts to formulating a solution, and there are no “one-size-fits-all” answers. While it might be tempting to just purchase a life insurance policy that covers your estate tax liability, wouldn’t it be better to avoid the liability entirely? Call your CPA or financial planner and ask her or him for a recommendation. They know who can help you and the cost is minimal compared to the savings your family will receive.
Oh, the other good news is that Congress wants desperately (at least they say they do) to minimize estate taxes in the future. While the exact amount is still unresolved, generally speaking the experts are claiming that it will be permanently fixed at somewhere between $3.5 million and $5 million in 2013. We can only hope and vote, accordingly.
William G. Nolan is an Elder Law attorney, founder of NOLAN Elder Law, LLC, in Birmingham. His firm assists seniors and their families with asset protection strategies, Veteran’s benefits and essential estate planning. www.NolanElderLaw.com
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