I have received a lot of questions lately about how much a person can pass free from the estate tax when the person passes away. This is referred to as the estate tax exclusion amount. At the moment, it is $5,120,000. (The amount was adjusted for 2012.) However, the tax laws are set to default back to $1 million on January 1, 2013 (and at a greater tax rate for any amounts above that!). Generally, a married couple can double the amount that can be passed upon their deaths, if they have done the proper estate planning. This usually involves setting up a joint trust or separate trusts.
We will see what happens after the November election. No matter where you stand politically, we are hoping this issue will be resolved before the end of the year. In 2010, we were facing the same situation - defaulting back to $1 million on January 1, 2011, and Congress acted to amend the law through 2012. But they waited until December 17, 2010! So, I anticipate we will face a similar situation this year, with Congress acting sometime in December. Until then, we cannot be sure what amount a person can pass estate tax free.
- Sarah P. Wenzel