The big financial news that was on everyone’s mind at the end of the year involved the possibility of the United States going over what was being called the “fiscal cliff.” If the powers that be did not come up with some type of new legislation certain tax increases and spending cuts would have been implemented.
One of these tax increases would have been applied to the federal estate tax. The maximum rate of the tax was scheduled to rise from 35% to 55%, and the exclusion would have gone down from $5.12 million to $1 million if we would have actually gone over this so-called cliff.
Various different possible alternatives were floated as legislators on both sides of the aisle negotiated a compromise.
In the end what we are left with is very similar to what we have had for the last two years since the passage of the tax relief act that was signed into law at the end of 2010 extending the Bush era tax cuts.
The base $5 million estate tax exclusion is still in place but it is adjusted annually for inflation, which is why it was $5.12 million in 2012.
The maximum rate of the federal estate tax has gone up as a result of this fiscal cliff deal, but the increase is not as severe as the 55% that we were potentially faced with if no new legislation had passed.
Going forward the top rate of the federal estate tax is 40%, and this also applies to the gift tax and the generation-skipping transfer tax.
If you are concerned about how the estate tax may impact your family’s future by all means, get in touch with us to arrange for a free consultation. You can contact us electronically by clicking this link: Free South Carolina Estate Planning Consultation