The estate tax is a tax that is levied on your estate assets at the time of your death. Each taxpayer is entitled to take advantage of the lifetime estate tax exemption limit that will offset any estate taxes due at the time of death. That limit is set to make a significant change for 2013 that all taxpayers should be aware of.
Under the current tax regime, each taxpayer may use the lifetime exemption limit of $5.12 million to avoid that payment of estate taxes. Any countable estate assets above the lifetime exemption amount found in the decedent’s estate at the time of death are then taxed at the rate of 35 percent. Both the lifetime exemption amount and the tax rate, however, are subject to change and will change at the end of the year unless Congress takes action before then. As the law stands, the lifetime exemption limit will automatically decrease to just $1 million for 2013 and the tax rate will increase to 55 percent. Congress may decide to extend the current limit and tax rate, or may completely change either the limit or the rate; however, if Congress elects not to take action, then the planned changes will take effect automatically, meaning millions of taxpayers will have estate tax exposure that do not now.
If you think that your estate may be affected by the upcoming change, be sure to consult with your estate planning attorney now to decide what changes, if any, you need to make to your plan.