One of the things that is important to keep in mind when you are considering the topic of estate planning is the fact that things are always changing. Some of these changes are specific to you and your family, things like divorces, remarriages, births, deaths and your own personal financial profile. These types of things are obviously going to be immediately self evident to you, but there are also legislative changes that often come down the pike that can have an impact on your future plans.
For an example, let’s take a look at the estate tax. Right now the estate tax exclusion is $5 million, and this figure is scheduled to remain in place through 2012. But if no new legislation is passed in the meantime, the estate tax exclusion is set to return to the 2002 level of $1 million in 2013, and the maximum rate of the tax is scheduled to revert back to the 2001 level of 55%. So if the current laws remain in place unchanged, a $5 million estate would pass on New Year’s Eve in 2012 untaxed. But on the next day, the taxable portion of that same estate would be $4 million and it would be taxed at a rate of 55%. As a result the government would take $2.2 million of this $5 million legacy and the heirs would receive $2.8 million.
This is just one example of the way that ongoing legislative changes can impact your estate plan. 2012 is an election year and there will undoubtedly be significant debates surrounding the matter of the estate tax as the current tax relief act approaches expiration at the end of next year. The best way to make sure that you are prepared for all contingencies is to engage in ongoing consultations with your estate planning attorney. Your attorney will be completely aware of all changes as they happen, and he or she will make the appropriate recommendations every step of the way.