Is the Current Estate Tax Law Permanent?

After years of shifting rates and exemptions, the estate tax is now permanent. Not only does it ensure stability, the new law also preserves opportunities for estate-planning using whole life insurance.

One of the big surprises from the last-moment deal that pulled the nation back from the fiscal cliff was the permanent estate tax law, which should make estate-planning go much more smoothly for advisors and their wealthy customers.

The American Taxpayer Relief Act of 2012 sets the top estate tax rate at 40 percent -- permanently, after years of shifting rates and exemptions, and annual surprises. That rate is up from the previous 35 percent, but much lower than the 55 percent maximum that would have occurred had the new law not been enacted.

In addition, the lifetime estate and gift tax exemption amounts — of $5 million for individuals and $10 million for couples, indexed for inflation — remain unified. These amounts are extended permanently, for estates and gifts made after Dec. 31, 2012, according to an analysis from the Association for Advanced Life Underwriting.

Absent the new law, the exemption amounts would have dropped to $1 million and $2 million, respectively, as of January 1st, 2013.

The new legislation also keeps portability provisions in place. These govern unused credits for surviving spouses.

The fact that Congress made the changes permanent is key. It means people no longer have to do estate planning in an environment that is up and down and where the exemption amounts and tax rates can snap back to previous levels or change frequently. You can do long-term planning, knowing that these levels are fixed, permanently, and that the estate and gift tax exemption is unified.

The unified credits will help with the transfer of assets while clients are alive. Unification will also help with business succession planning.

Congress can always revisit the law in the future and make changes then, but the permanent nature of the change suggests that this is unlikely to occur in the near future.

Let Bennett Insurance Group help when you are considering your needs for financial planning or insurance products for your home or business. Contact us at 623-979-4140

Presented By:
Jim Bennett
Bennett Insurance Group
623-979-4140
http://jimbennettinsurance.com
jim@jimbennettinsurance.com