Do you know what time it is on Capitol Hill? It is budget time. When it comes to estate taxes, did you know that President Obama wants to reduce the estate tax exemption back to $3.5 million?
Just when taxpayers and estate planning attorneys thought "it was safe to return to the water" with the estate tax exemption level finally becoming "settled law" (except for inflation increases), President Obama would like to send the IRS shark after estate plans past, present and future.
For some expert analysis on what this could mean to you, be sure to read a recent Forbes article titled “Obama Budget Takes Aim At Popular Wealth Transfer Tools.”
You see, the last budget battle gave a huge boon to wealth transfer and estate planning in the form of ATRA or the American Taxpayer Relief Act. The estate tax – greatest and most direct of all transfer-tax barometers – was set to allow individuals to exclude up to $5.34 million and transfer this freely without the dreaded tax. Amounts above that threshold would be taxed at up to 40%.
President Obama’s proposal, as found in The Green Book, drops the exclusion and kicks up the applicable rate. The result: we return to 2009 level figures, with an exclusion amount of $3.5 million and top rate of up to 45%.
But that is not all.
In addition to lowering the exemption and raising the tax rate, the Forbes article identifies many targets, some old and some new, including laws relating to or supporting annual gifts to trusts, GRATs, dynasty trusts, and regular grantor trusts.
For now, anyway, it is important to understand that these proposals are presently political proposals and not legal realities.
That is the case for now, at least.
Nevertheless, this sneak peek at the contents of The Green Book provides a foretaste of what the administration would like to cook up for the ever fewer remaining Americans who are actual taxpayers in Overland Park or elsewhere.
Remember: “An ounce of prevention is worth a pound of cure.” When making your financial, tax and estate plans, do not go it alone. Be sure to engage competent professional counsel.
For more information about estate planning in Overland Park, KS (and throughout the rest of Kansas and Missouri) and to download free tools to help you organize your estate, visit my estate planning website.
Reference: Forbes (March 4, 2014) “Obama Budget Takes Aim At Popular Wealth Transfer Tools”