Tax laws have a direct and considerable effect on your estate plan. Throughout an election year, such as this year, the fate of many tax laws is often unpredictable. Arranging an evaluation of your current estate plan with your estate planning lawyer is an excellent way to make sure that your plan benefits from the present tax laws and prepares for any scheduled modifications.
A change in administration could lead to a modification in viewpoint with regard to tax laws. As the tax laws presently stand, there are a number of them that are set to end or alter for 2013 consisting of the following:
Investments: The optimum rate for long-term capital gains might rise to 20% from 15% unless Congress acts prior to the end of the year. Stock dividends, presently taxed at a maximum of 15%, will also be taxed as normal earnings, with a leading tax rate of 39.6%
Estate Tax Exemption: Currently at $5 million, the exemption is scheduled to drop back down to $1 million next year in 2013.
Gift Tax Exemption: Likewise currently at and all time high of $5 million and set to return to $1 million in 2013.
Estate Tax and Present Tax Rates: Currently set at a maximum of 35%, both will go back to an optimum rate of 55% on January 1, 2013 absent action by Congress.
Payroll Tax Cut: Includes about $40 to the typical employee’s take home pay. Congress extended the tax cut through 2012, however its future is uncertain.
Tax Rates: President Bush carried out a tax rate cut that is still in effect putting the rates at 10% – 35%. If they expire, individual tax rates will return to 15% – 39.6%.
Alternative Minimum Tax: The AMT was initially meant to avoid high income taxpayers from avoiding taxes; however, it was not indexed for inflation, resulting in more taxpayers being needed to utilize the AMT throughout the years. A “patch” has been used by Congress each year to fix this, however the “patch” does not extend to 2012 at this time. As numerous as 31 million taxpayers are expected to be impacted if another Patch is not forthcoming.
Tax Reductions and Credits: Numerous momentary deductions and credits have actually been embraced to help reduce the financial stress of the economic downturn. There is no assurance that these will be extended.