In what has been speculated as an attempt to garner party unity on a vote for a tax plan supported by U.S. President Barack Obama, Democrats in the U.S. Senate have abandoned proposed provisions for the estate tax which originally called for a partially extended estate tax cut of 45 percent on inheritances of more than $3.5 million (the same parameters as those in effect in 2009). By axing the proposed estate tax cut, the Democratic plan would ultimately restore the estate tax to the pre-Bush-tax-cuts-era of a 55 percent tax on inheritances of more than $1,000,000. The tax bill proposed by Republicans would extend all of the Bush Tax cuts, including the current 35 percent tax on inheritances over $5 million.
According to the Tax Policy Center, a nonpartisan research group in Washington, if Congress doesn’t act on the estate tax and it reverts back to 55% on inheritances of more than $1,000,000, 52,500 taxable estates would pay $40.5 billion in taxes in 2013. With the Republican plan, 4,000 taxable estates would pay $13.5 billion. The eliminated Democratic plan would have generated more than $21 billion in taxes from more than 7,000 estates.
As Congress debates the course of tax policy in the United States, individuals are left to wonder what the status of the estate tax will be when they die and whether they should be planning around it. This uncertainty can lead individuals to presently ignore the estate tax altogether, with the hope that things will be resolved in the future. However, neglecting to plan for the estate tax can mean serious detrimental consequences for those who are unprepared, and the “wait and see” approach should be avoided whenever possible. One of the easiest ways to put concerns regarding the estate tax behind you with confidence is to consult with a Florida estate planning attorney who is also educated on tax matters. That way, you know that the estate planning attorney you are consulting is prepared to offer knowledgeable advice regarding the estate tax should an inquiry arise.
With proper planning, there are several methods available to lawfully defer or eliminate the estate tax. If you are interested in implementing a Florida estate plan and have questions regarding possible tax consequences, contact a knowledgeable Florida estate and tax attorney who can assist you today.