Since 2001, there have been many changes to federal tax laws regarding estates. In the complicated world of estate planning, the focus has been on exemption amounts and the tax rate above it, even in New Jersey. From 2001 to 2010, the exemption rate continually rose while the tax rate declined until disappearing completely during most of 2010. The tax returned in 2011 and the exemption was set at $5 million with a 35 percent rate above that, and the American Taxpayer Relief Act made those 2011 changes to the exemption rate permanent.
This does not mean that estate planning should only concern the wealthy, however. Many concerns such as who will care for children of deceased parents and who becomes the insurance policy beneficiaries require early attention and an understanding of the Taxpayer Relief Act could affect them. The beneficiary designation form, which overrides a will, must be updated as policies and life situations change.
People of considerable means made faulty decisions regarding their estates and gave away valuable assets because they feared the estate tax and related gift tax exemptions would be reduced, but both were raised instead. President Obama’s budget proposal seeks to reduce the exemption level to $3.5 million and raise the tax on assets beyond that to 45 percent. While these changed would not take place until 2018 if passed, some people are worried about what other changes they may have to look forward to.
If you’re in a second marriage or later, have minor children or have substantial retirement assets, seeking the counsel of a qualified estate planning attorney will be in the best interest of both you and your family. The IRS or a probate lawyer could receive a sizable chunk of your assets if your affairs are not in order.
Source: El Paso Inc, “Estate planning: A moving target“, Paul Sullivan, May 05, 2013