What the fiscal cliff deal means for the death tax.
If you’ve been paying attention this first week of 2013, you already know that Congress passed a tax compromise that averts the fiscal cliff and makes permanent the federal estate tax with an exemption of $5.12 million/individual (indexed for inflation) and a tax rate of 40% for amounts over the exemption.
If you’ve read the January issue of BEEF, you know from my column that I won’t be happy until we have a permanent repeal of the death tax. However, because I’m a “glass-half full” kind of gal, I think this compromise is certainly a better option than the $1-million individual exemption with a tax rate of 55% that might have resulted had action not been taken in Congress.
I feared the worst and am okay with the actual outcome -- not because I feel it’s a perfect solution, but because it’s a step in the right direction. The real solution, in my opinion, is spending cuts -- not unfairly taxing the deaths of Americans who have already paid taxes throughout their lifetimes. Read my column here for a more in-depth look on this topic.
Forbes.com does a great job of further explaining what these new rates actually mean, answering questions about the portability of the exemption, the gift tax and the generation-skipping transfer tax. But, one of the finer details that made sense to me was that if one individual only uses $2.5 million, then the surviving spouse can have a $7.5-million exemption upon their death.
For a more in-depth explanation, check out this video by Randy McKee, an estate planning consultant, from White River, SD.
This week’s poll on the beefmagazine.com homepage asks, “What do you think of the fiscal deal?” With 167 votes so far, 80% say “it stinks”; while another 13% think it’s a good compromise, and the final 7% aren’t sure.
Take a minute to vote and scroll through the heated discussion in the comments section.
What do you think of the fiscal cliff decision as it relates to the estate tax? How will it impact your estate planning in the upcoming years?