With less than 2 days to go until the Fiscal Cliff, many folks are still wondering and asking what is going to happen to the Federal estate tax.
The latest news seems to suggest that as expected the estate tax is being used as a bargaining chip. It will be very interesting to see what comes out of the weekend discussions.
(Edited on 12-31-2012) There are 4 possible scenarios that keep coming up in discussions amongst commentators (in no particular order, although a) is being suggested by news outlets as the newest proposal agreed upon by many parties in the Senate although it has not been introduced formally as of 4:17pm (est) on 12-31-2012):
- a) NEW PROPOSAL - Federal exemption stays at or near $5MM with a hike in the top marginal estate tax rate up to 40%
- b) we go over the cliff and the Federal exemption goes down to $1MM with a hike in the top marginal estate tax rate up to 55%;
- c) a bi-partisan compromise by lawmakers results in the Federal exemption going down to $3.5MM with a hike in the top estate tax rate up to 45%
- d) the weekend negotiations result in lawmakers maintaining the exemption at $5MM (or $5,120,000) and the estate tax rate at 35%until next year, or until some other time in the future when Congress will have to address this again to avoid a drop in the exemption and hike in the tax rate.This is what I less-than affectionately refer to as the "punt," or the "band-aid approach."
Of course it is entirely possible that none of these scenarios will end up occurring, or that we see elements of more than one of these scenarios in the final outcome. It is also possible that we go over the cliff, and then come back to one of these scenarios or another. We will just have to wait and see...
Regardless of what happens, you should contact a Connecticut estate planning attorney to discuss planning for your family. You can get our contact information here.