If Congress fails to act, 14.7 million U.S. households would have a potential estate tax liability. The average tax due for these families would be $1.4 million, LIMRA states.
As we approach the end of 2012, you may be wondering if the Bush-era tax laws will expire come 2013. Have you done everything to ensure your estate plan will be able to survive a tumble off the tax cliff?
When it comes to the “default” 2013 estate tax, some 12.5% of U.S. households may come under the estate tax axe, according to new analysis by LIMRA. These numbers were picked up and reported by LifeHealthPRO and reported in its article titled, “LIMRA: More than 1 in 8 U.S. households may owe estate tax in 2013.”
This change in the estate tax exemption limit scoops up a huge new group of taxpayers in its dragnet who otherwise might not have been subject to the estate tax axe. In fact, many in this new group of estate tax taxpayers have not previously found themselves at the top of the wealth pyramid. So, how is this possible?
If (or when) we fall off the fiscal cliff, the IRS will be forced to apply 12-year-old laws, and with them a 12-year-old estate tax exemption and its estate tax rates. In other words, the estate tax exemption will revert to $1 million from the current $5.2 million, and a 55% maximum estate tax rate will replace the current 35% rate. Yes, that’s a quite a low blow.
Remember, it’s not just your bank account that the IRS counts against your estate tax exemption, but all of your assets, to include your home and life insurance death benefits.
Unfortunately, that’s just the tip of the tax iceberg. Not only is it absolutely vital to keep track of the law, but it is essential that you know the steps to take now to protect yourself and your loved ones in the event Congress and the White House fail to act.
Reference: LifeHealthPRO (September 27, 2012) “LIMRA: More than 1 in 8 U.S. households may owe estate tax in 2013”