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Most of us understand that we have to pay taxes while we are alive, but did you know that the government can also tax us to die?  If maximizing the size of your estate for distribution to your family/heirs is of interest to you, read on.

Currently in 2012, estates valued up to $5.12 million (under the Uniform Estate and Gift Tax Exclusionary Amount) are not subject to the death tax, and any amounts exceeding the Uniform Estate and Gift Tax Exclusionary Amount are taxed at a rate of 35%.  However, unless congress takes alternative action, the current law governing the Exclusionary Amount will expire on January 1st, 2013.  The Exclusionary amount will then be reduced to $1 million, and estates in excess of that amount could be taxed at a rate of 55%.

There are many arguments from various different political, legal, and financial schools of thought for why or why not to decrease the exclusionary amount. But the fact of the matter is that, for many of us, our estate may be in excess of the $1 million uniform exclusionary amount when you consider real estate, life insurance, etc., making the possible decrease an issue that concerns us all.

From my viewpoint, I see the following possibilities:

  1. Death taxes can be eliminated altogether;
  2. The 2012 Uniform Estate and Gift Tax Exclusionary Amount can be reinstated;
  3. The Uniform Estate and Gift Tax Exclusionary Amount can be indexed for inflation;
  4. The 2013 Uniform Estate and Gift Tax Exclusionary Amount of $1million would be the law;
  5. A compromise at approximately $3 million Uniform Estate and Gift Tax Exclusionary Amount, with a tax rate of 45%.

 

Ultimately, it is anyone’s guess what congress will or will not do.  However, do you really want to bet any portion of a lifetime of accumulated assets that you intend to pass on to your family to be taxed instead? For this reason, we urge you to discuss this matter with your accountant, financial advisor/planner and an estate planning attorney, now.

In the event you wish to avail yourself of a complimentary evaluation, please contact us at (505) 989-8117 or email us at reception@jaygoodman.com to schedule an appointment.   Our offices are located at 2019 Galisteo, Suite C3, Santa Fe, NM  87505, and 4801 Lang Avenue NE, Suite 110, Albuquerque, NM  87109.

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