Last month Congress failed to pass a major tax bill that would have changed the rules on estate taxes. To encourage passage, the bill included a raise in the minimum wage and extension of a number of expired tax breaks for businesses and individuals. But in an election year, the bill proved too controversial and did not pass. So where does that leave estate taxes and your tax planning?
Currently up to $2 million of any individual’s estate is exempt from tax. Above that amount, a top tax rate of 46% applies.
The exemption will increase to $3.5 million in 2009 and in 2010 there will be no estate tax. But for that year only. Unless Congress acts, rates and exemptions are scheduled to revert to 2001 levels beginning in 2011.
It’s highly unlikely that Congress will let that happen. In fact, another attempt to change the rules is expected this fall. A relaxation of the rules rather than outright repeal is most likely.
The most recent proposal called for raising the exemption amount to $5 million for an individual and $10 million for a married couple. The tax rate on estates above the exclusion amount but less than $25 million would be the capital gains tax rate (currently 15%). Of course, these numbers may change in any new proposal.
The uncertainty over estate tax legislation is not an excuse to avoid planning. All adults should have basic estate planning documents, regardless of their age or the size of their estate. These documents include a will or trust, medical directives, and guardianship documents for minor children.
For assistance with your planning, give our office a call.
Questions for our Financial Expert?
E-Mail us at:
finance@ClevelandSeniors.Com
Top of Page
Back to Tax Tips of the Week
Home
What's New
Legal & Financial
