Currently, if you die and your estate has a value of less than 5.12 million, no Federal Estate Tax is due because of your death. If Congress does nothing, this value will change to one million and the estate tax rate will be 55 percent on any funds in excess of this amount in 2013. It is estimated 52,500 estates will be affected by the decline in the exemption back to one million if Congress fails to take action.
In 2009, estates were exempt from Federal Estate Tax if the value of the estate was less than 3.5 million. Any funds in excess of this amount were taxed at a 45 percent rate. For many residents of this Valley, their estate can be in excess of one million just by having a home and a life insurance policy. Many trusts direct the Trustee to pass the assets of a husband and wife trust to the Surviving Spouse. When the exemption is at five million, there is normally not a concern that estate taxes will be owed at the death of the surviving spouse. However, this concern could be valid if the estate tax exemption is lowered to one million.
It is important we keep abreast of whether our representatives will be addressing this issue before the end of this year. If the estate tax exemption decreases to one million, it may be time for many individuals to review their estate plans to see if they want to make changes to reduce exposure for estate taxes at their death.
Ms. MacDonald’s practice is limited to Estate Planning, Probate, Conservatorships, Elder Law and Trust Administration. Ms. MacDonald maintains her practice in the Santa Clarita Valley at 25115 Avenue Stanford, Suite B-124 in Valencia. She can be reached at 661-294-6464.