What is the Current Estate Tax or “Death Tax”?

Answer by Miami Trust Attorney Phillip B. Rarick, Esq.

The estate tax exemption for 2012 is $5.12 million; estates above $5.12 million are taxed at the rate of 35%. Unfortunately, absent congressional action, the estate tax exemption will fall back to $1 million per person with a top rate at 55% on January 1, 2013. While many commentator’s do not think this will occur, this is the current law and will remain so if Congress continues to be mired in a deadlock (and many commentators believe this deadlock will continue for years). The good news is that 2012 is an excellent year to make gifts in a tax efficient way as the lifetime exemption for gifts is also $5 million.

Important Planning Note: Estate tax law is fluid and difficult to predict. The estate tax is a moving target. These realities make it essential that you establish and maintain a relationship with an estate planning attorney who will keep you advised of the latest changes in the law.

To determine your current net estate, add up the present value of your assets and subtract your debts. Your assets include everything you own: home, other real estate, investments, personal belongings, retirement benefits, IRAs, death benefits and life insurance. Many persons do not know this latter fact: Many persons believe life insurance benefits are not subject to the estate tax because such benefits generally are not subject to income tax. This is wrong. If you own the policy, the life insurance benefits will be subject to the estate tax if you are over the exemption amount listed above.

For More Information: Federal Estate Tax Chart Disclaimer

The information on this blog is of a general nature and is not intended to answer any individual’s legal questions. Do not rely on information presented herein to address your individual legal concerns. If you have a legal question about your individual facts and circumstances, you should consult an attorney that is experienced in Florida estate planning law. Your receipt of information from this website or blog does not create an attorney-client relationship and the legal privileges inherent therein.