The estate tax is something that a lot of people don’t have a firm understanding of, and this is largely because so many people ignore estate planning altogether. A survey that was conducted by the Harris organization late in 2009 found that only about 35% of the adults who participated had executed a last will or some other vehicle of asset transfer.
Even among older Americans there is a lack of preparation with 23% of individuals over the age of 55 going through life without an estate plan.
Due to the harsh bite of the estate tax, you are risking enormous amounts of money if you do not educate yourself and take action when necessary.
Whether or not your estate will be subject to the estate tax is going to depend on its value in relation to the estate tax exclusion that exists at the time of your death. At the present time this exemption is $5 million, and the rate of the estate tax is 35%. But that does not mean you should rest easy if your estate is worth less than $5 million.
At the end of 2012 the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 is going to expire. When it does, the estate tax exclusion is going to be sliced down to just $1 million, and the rate is going up to 55%.
$1 million is not the grand figure it once, and a lot of people who do not consider themselves to be rich have total assets that exceed this amount. In fact, there are approximately 8.4 million households in America that have assets of $1 million or more.
So if your estate is worth more than $1 million, the portion that exceeds this amount is going to be facing a 55% federal levy come 2013 unless there are changes to the laws made in the meantime. Given this reality, a $5 million estate would be presented with a $2.2 million tax bill and your family would be left with just $2.8 million.
This is a serious matter. If you’re not already prepared, now would be a good time to get in touch with an estate planning attorney so that you can take steps to gain estate tax efficiency.