Many & LoCoco Legal Blog

Wednesday, January 9, 2013

Estate Taxes after averting the Fiscal Cliff


On January 1, 2013 the Bush era tax cuts were set to expire. One dire consequence of this event was that the Federal Estate Tax Exemption amount was scheduled to be reduced from five million dollars to one million dollars if Congress and the President did not act.

Well, thankfully, they acted.

What Congress and the President did with regard to Federal Estate Taxes has, at least for the moment, provided us with some certainity, which has been lacking in the estate planning world for sometime now.

They have permantely fixed the Federal Estate Tax Exemption amount at five million dollars. What that means in simple terms is for a married couple, their joint community estate would have to be over ten million dollars for there to be a tax. They did raise the tax rate from 35% to 40% on such estates. And here is the key. They made this change permanent, only with the exemption amount being adjusted for inflation every year.

Now, the word "permanent "in Washington is not defined the same way as you and I would define the word. Congress has a way of always changing or amending "permanent" things. But for now, it seems a fair bet, that the five million dollar exemption will remain with us for sometime, which does provide us with some certainity in dealing with estate planning.

For most of us, Federal Estate taxes will be something we do not have to worry about. But that does not mean that we should not consider our estate planning needs. We should all have a Will, and we should update said Will periodically to keep up with the changes in our life. We should have Power of Attorneys, providing someone with the authority to act on our behalf in all matters. And lastly, we should have living wills, also known as an advance medical directives. If you don't have any or all of these documents in your estate plan, you are not alone. For example, 64% of Americans do not have a basic Living Will.

With proper estate planning, you can rest assured that upon your death, your estate will pass down the way that you want it to pass down. It gives you and your loved ones certainty. And certainity makes everything a lot easier for everyone.

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Many & LoCoco

Attorneys at Law

(504) 483-2332


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