I know it's easy to just stop paying attention to what they're talking about or working on in Congress. You have a lot to do and most of the time it feels like there's not much you can impact anyway. But I want to make you aware of a situation that you can handle without a visit to Capitol Hill or a letter to your congressman.
Estate tax laws may soon be very different. Our period of relief from these high taxes is possibly coming to an end at the end of the year. Let's look at what this means to you:
Here are the facts: You are not rich. You own some land that has been in the family for generations. It may be that you have sons who farm. You're getting older and slowing down a little, starting to enjoy the grandkids more. Was it your plan to will that land to the government? Is that what your dad and grandpa wanted?
On January 1, 2013 estate tax laws change. If you were to die on December 31st your estate would receive a $5.12 million exemption. On January 1st that exemption amount drops to $1.0 million if Congress fails to act. For your estate valued over $5.12 million the tax rate on Dec 31st is 35%. On January 1st it moves back to 55%. That's a big change.
Let's say you own 1,000 acres – valued at $9,500 per acre. Your estate value is $9,500,000. You die on Dec 31st and you could owe $1,533,000 in taxes. Die 24 hours later, on Jan 1st and now your estate owes $4,675,000 in taxes. What does that mean to your heirs? They must sell 492 acres to pay Uncle Sam. Dad and Grandpa just rolled over in the grave! On top of that you may have to pay state taxes. You might not be thinking about that …. but the government won't forget!
So here are your choices:
1) Take no action, smile and assist the federal and state governments with their cash shortage.
2) Schedule a meeting today with a professional who can assist you in making solid plans for your estate.
With the increased exemption amount in 2012 and the uncertainty of the Presidential and Congressional elections, it will take some time to work thru any gifts you decide to give. Keep in mind, the 4th quarter of 2012 will be an extremely busy time for estate planners, attorneys, and CPAs, so now is the time to address the issue.
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