The bad news is that if you are lucky enough to live past 2012, the federal estate tax law that is on the books right now provides for a $1 million coupon and a 55 percent tax rate on the excess. If that sounds crazy, just remember who writes the federal tax laws. (You may remember the old joke that asks, if the opposite of “pro” is “con,” what is the opposite of “progress”?) Given the prospect of the $1 million coupon and the 55 percent tax rate, you might want to take some time now to review your estate plan and make changes that could drastically affect how much of your estate goes to your loved ones, and how much goes to the IRS.
Of course, Congress may act between now and the end of 2012 to extend the $5 million coupon and the 35 percent tax rate. After all, Congresspersons have their own estates to worry about, right? Yes, but the uncertainties of our economy and the track record of our elected officials when it comes to pulling in the reins on runaway spending should give us all pause. Prudence dictates hoping for the best, but planning for the worst. It makes sense to at least take into account the possibility that Congress will leave the tax law alone between now and 2013, and take steps now to take advantage of what may be a disappearing tax bonanza.
Now is the time to look into how your estate will be affected by the return of the estate tax. Contact your trusted advisors to find out what changes should be made to your “rule book”—the set of documents that will say what happens to your stuff after you are gone. You may have some prime opportunities to make a huge difference in the amount of your estate that goes to your loved ones. You may even be able to “disinherit” the IRS entirely.