Are regular readers know that there has been a lot of buzz in the estate planning world over the recent changes introduced by President Obama’s 2013 budget plan. Among other things, the changes included a permanent estate and gift tax exemption of $5 million, to be adjusted annually for inflation. Unfortunately, though, it has become clear that that change may not be as permanent as previously hoped.
That is because a provision in President Obama’s 2014 budget calls for a decrease in the 2018 estate, gift and generation skipping transfer exemption amounts. The budget proposes to lower the estate and GST tax exemption to $3.5 million, and to $1 million for gift tax. These amounts would not be indexed for inflation. In addition, all three tax rates would rise, with a top rate of 45 percent.
So what exactly was meant by all the talk about a permanent estate and gift tax exemption? In the tax world, permanent doesn’t mean what it does in everyday understanding, since Congress can always change aspects of the law. Permanent only means there is no expiration date specified.
The bottom line? If the proposal gains support and is passed, there is likely to be another rush to give away assets so that folks’ estates stay below or as close as possible to the exemption amounts.
In our next post, we’ll take a look at some potential changes to watch out for in terms of family inheritance planning, especially with respect to trusts and individual retirement accounts.
Source: Source: New York Times, “Estate Planning Remains a Moving Target Under the New Tax Law,” Paul Sullivan, April 26, 2013.