When a person dies and the decedent’s assets are transferred to another party, those assets are subject to taxation. The estate tax has been under scrutiny by lawmakers for the past several years. Some politicians want to continue the tax breaks started during the Bush administration; however, the Obama administration is proposing to end the Bush-era cuts on the estate tax, which could affect many in Florida. Now, the U.S. Senate Democrats have decided to eliminate the estate tax language in the bill proposed by Obama.
The Senate is slated to vote on the proposed bill, which would extend tax cuts until 2013 for up to 98 percent of American households. However, many Democrats in the Senate were skeptical regarding the proposed legislation because it would increase the estate tax for some Americans. Democrats have often disagreed with one another regarding the estate tax. Leaders of the party hope that taking out the language regarding issue would garner more support for the bill from Democrats within the Senate.
As of now, the estate tax offers a $5.12 million per-person exclusion and a maximum 35 percent tax rate. The original plan proposed by Obama would have changed the per-person exclusion to $3.5 million, while raising the maximum rate to 45 percent. If Congress is not able to pass new legislation, the per-person exclusion would drop to $1 million, while the maximum tax rate would increase to 55 percent.
If no new legislation is passed, taxes would increase on 52,500 estates, which would be required to pay a total of $40.5 billion in taxes in 2013. In contrast, 4,000 estates would pay $13.5 billion under the Republican plan. Under the plan which was stripped from the proposed bill, 7,000 estates would be taxed for more than $21 billion.
In order to best protect their assets, is important to remain informed on all of the latest changes in estate tax laws and utilize tax-saving strategies when planning your estate, such as the use of trusts to protect assets. An estate planning attorney can help you create an estate plan that minimizes tax issues and maximizes flexibility for managing your assets while you are still living.