The "Fiscal Cliff" refers in part to the huge tax increases that are set to occur on January 1, 2013 if Congress does not take action to avoid this by then end of the year. This article in Morningstar goes into a bit more depth as to what the Fiscal Cliff means to U.S. credit ratings (click here for article).
So what compromise(s) if any will be made to avoid the Fiscal Cliff? Given the posturing by both sides since the 2013 Election that has already taken place, the answer may still be unclear.
So how do we plan in light of the uncertainty? One of the tools that may be able to be utilized in an uncertain tax environment (depending on the circumstances) is what I call "wait-and-see exemption planning." This type of planning occurs now, but involves an estate plan with flexible tax planning built into the documents. The purpose of this kind of planning is to allow us to make crucial tax-planning decisions at the death of the first spouse, rather than locking you into expensive decisions today that may not be necessary at your death.This type of planning can be very effective, but must be done before the death of the first spouse, and should only be done with the assistance of a qualified estate planning attorney.
If you would like to discuss this type of planning in the context of your existing circumstances with a Connecticut Estate Planning Attorney, feel free to contact our office to schedule a consultation. Our contact information is on our website here.