From the view of December 2011, 2012 brings little change to federal estate tax laws; although, Congressional discussions of change are always on the horizon.
What You Need to Know about Federal Estate Taxes in 2012
- The federal estate tax exemption has been indexed for inflation and in 2012 is set at $5,120,000.If you die in 2012 and havent used any of your exemption during your lifetime, you can pass up to $5,120,000 without paying federal estate tax.
- If you die in 2012 and havent used any of your exemption during your lifetime, you can pass up to $5,120,000 without paying federal estate tax.
- If youve used some of your exemption during your lifetime, your federal estate tax exemption is reduced by that amount.The top rate for federal estate tax is 35%.
- The 2012 exemption and tax rate will last one year at the most; they are set to expire December 31, 2012.The law now includes a provision called portability, which is supposed to mean that married couples dont need tax planning trusts or asset allocation to take advantage of doubling the federal estate tax exemption.
- YOU CANNOT COUNT ON PORTABILITY. The concept of portability makes sense but the actual practice is fraught with problems and is not likely to work. If youre married, it may be in your best interest to engage in comprehensive estate planning that includes tax planning (A-B trusts) and fully fund your assets, making sure both you and your spouse use your federal estate tax exemptions.
If you want to understand how the federal estate tax affects you in 2012, consult with a qualified estate planning attorney.