Voters are subjected to various risks regarding the upcoming presidential election. Estate administration and decisions would be lot easier if individuals, estate planners and California heirs knew what to expect from the candidates and the Internal Revenue Service.
Today's $5 million dollar estate tax exemption could fizzle to $1 million on the first day of 2013. Even more maddening may be the prospect that nothing will change until the year after next and estate planning worries will never really go away. Everything that affects estate planning could be wrapped around the outcome of the election or how Congress feels between now and New Year's Eve.
With the fate of estate taxes and exemptions in limbo, estate counselors are advising clients based on experience. Since it is unclear how estate and gift taxes will fare under an old or new presidential administration, some advisors are using strategies that help clients shore up estate planning gaps. Wills, trusts and powers of attorney are estate planning constants that deserve attention while tax issues are being determined.
People affected by inheritance taxes are also studying presidential promises.
Republican presidential candidate Mitt Romney promises to eliminate estate taxes. The standing president has hinted that estate tax exemptions will drop to $3.5 million -- a compromise between the current estate tax structure and the $1 million bottom line.
Romney hopes to repeal the estate tax and keep the gift tax at 35 percent. Would people stop making gifts if the plan were put into effect? Estate planners are also concerned how long an estate tax could remain repealed. Valuation discounts, important to family limited partnerships, might be limited under Obama's estate tax plans.
Some estate planning historians note that the unified tax credit for estate and gift taxes
has never been reduced during the 40 years in which it has been in effect. That makes some advisors and clients feel comfortable that tax exemptions will remain favorable, while others fret that change is due and imminent.
Source: forbes.com, "Romney Wants No Estate Tax - Case For 2012 Mega Gift Remains Compelling," Peter J. Reilly, Oct. 14, 2012