A New Year’s Resolution for Our Estate Tax Conundrum

Saturday, January 19, 2013

“For those of us who have been involved in any estate planning projects within the last few years, either as a client or as a professional, the path has been uncertain and at times frustrating. The federal estate tax laws have been in flux for an uncomfortably long time, making planning difficult. The laws that were passed in 2001 were, by definition, short-lived, and until the legislation passed in the early hours of New Year’s Day 2013, congressional efforts to enact something more permanent had failed. We saw numerous pieces of legislation introduced, yet only interim measures managed to obtain the votes necessary to become law. Thus it is with great pleasure and relief that we write about a law that we dare describe as permanent.”

So begins our 2013 newsletter currently in progress, to be finalized and posted shortly. It will provide a more complete description of the permanent federal estate tax law passed by Congress in the face of the fiscal cliff, but we can summarize the provisions in short form here. The new law preserves the general scheme of the most recent federal estate tax laws, with an exemption amount for estate, gift and generation skipping taxes unified at $5 million per person (indexed for inflation). The concept of portability introduced a few years ago has been adopted as law for taxpayers whose executors take the required steps. The only significant change in the law from what had been applicable for the years 2011 and 2012 is an increase in the rate to 40% for taxable transfers over the exemption. The new law, combined with the new Maine estate tax, will allow us to provide advice that is, for the first time in a decade, based on laws that are not, by definition, due to change. Many clients have been waiting for changes in the law to review their plans, and we are delighted to undertake that review now, embracing the certainty provided by our new law. Our newsletter, available soon, will discuss some of the federal and state estate tax provisions and the nuances of how they may pertain to various estate plans. You should also feel free to call us to discuss how the changes may impact your plan.