The Future of the Federal Estate Tax Exemption
There is no hotter topic among estate planners – and the clients they serve – than the future of the Federal Estate Tax Exemption. While the current exemption amount of $5 million for an individual ($10 million for a married couple) removes almost all Americans from the purview of the estate tax, the exemption is scheduled to drop to $1 million for an individual ($2 million for a married couple) when the clock strikes midnight on December 31st, 2012. A million dollars sounds like a lot of money, but an exemption that low would impact a large number of middle class taxpayers whose only assets are a home and a retirement account. Small business owners and holders of commercial and agricultural real estate are even more likely to be affected. On top of this, the tax rate is scheduled to increase from 35% to 55%. Talk about kicking a hornet’s nest.
So what’s a politician to do? Lawmakers essentially have three options: first, they could do nothing which would result in the scenario described above; second, they could decide to keep the exemption at or near its current $5 million level; third, they could repeal the estate tax in its entirety.
What will actually happen? Nobody knows – not even the people who will ultimately make the final decision. However, most estate planning commentators believe the exemption will remain in the neighborhood of $3.5 – $5 million, regardless of who wins the election in November. Tax attorneys at McCleskey will monitor developments related to the Federal Estate Tax Exemption and are available to assist you with any tax and estate planning issues you may have.