The conventional wisdom among the attorneys and CPAs who plan for estate taxes, right up until the new Fiscal Cliff legislation was signed into law, was that the $5 million exemption was probably too good to be true. Couples could gift up to $10 million to their heirs without paying any gift taxes, and if you died with less than $5 million in your estate, your spouse could pick up the remainder and add it to his/her exemption, meaning that any family with less than $10 million in assets passing on to heirs could, with virtually no planning, escape federal estate taxes altogether. A deal like that won’t last in this age of budget deficits, right?
Then something funny happened: when it passed the American Taxpayer Relief Act of 2012, Congress not only made the $5 million exemption permanent, it also indexed those historically-high exemption amounts to inflation, so that this year the personal estate tax exemption climbs to $5.25 million. And contrary to virtually every professional expectation, Congress also kept the gift tax exemption at the same level as the estate exemption–and made THAT permanent.
For many people, these permanent higher thresholds are great news, and will greatly simplify their lives. Millions of dollars will no longer have to be spent on trusts and creative strategies, streamlining the economy. The permanent threshold does not take away from the importance of Estate Planning, but certainly makes the process more simple to plan.
Article written by Bob Veres of Inside Information
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