The recent negotiations in Congress regarding the so-called ‘Fiscal Cliff’ had many people looking to plan their estates worried, because they did not know how the changes would affect the estate tax and the gift tax rules. However, at the end of last year Congress was able to agree to make permanent many of the favorable estate planning rules. These rules reduced people’s tax liabilities in Florida and every other state in the country.
Congress agreed to make permanent the estate tax exemption level at the 2010 level of $5 million, which the new law had adjusted to monetary inflation. In 2013, the estate tax exemption will be $5.25 million, which would not be subject to taxation. Congress also agreed to allow the exemption to continue to be used for lifetime gifts.
Many experts have also commented on the advantages of the portability of the exemption between spouses, which has also become permanent due to the new law. This led to simplifying estate planning for many individuals. However, there was a five percent increase at the highest estate tax bracket. Estates in this tax bracket are now taxed 40 percent.
Despite all of the good news, there is still a significant amount of uncertainty in future estate planning as a result of the current debate regarding the so-called ‘sequestration’ which is another set of automatic changes in the government’s economic policies. Some experts believe this will have a significant effect on the effectiveness of some common estate planning techniques in Florida. Those looking to plan their estates may want to pay attention to how Congress deals with the sequestration deadline.