In our practice, the reality of the estate tax law is finally coming into focus and people are starting to take action. Here’s the background. Back in December of 2010, there was a new tax law signed by the president that is now being called the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010. Because of the passage of this piece of legislation, the estate tax exclusion was set at $5 million for 2011 with the maximum rate of the tax coming in at 35%.
This was some positive news within the estate planning community because, if no new legislation had passed, the exclusion was scheduled to be just $1 million and the rate was to be set at 55% at the beginning of 2011.
A provision within the tax relief act allows for an adjustment to the estate tax exclusion amount for 2012 to allow for inflation. As a result, this year the estate tax exclusion has been raised up to $5.12 million. So, if your estate is worth less than this amount it is not subject to the federal estate tax.
Before you turn the page and go about your business you would do well to take pause. In fact, this exclusion amount won’t last long. The Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 is scheduled to sunset at the end of 2012.
If it does in fact expire without any additional legislation passing that dramatically changes things, we will once again be faced with a $1 million exclusion and a 55% maximum rate that will take effect at the beginning of 2013.
Given the possibility of this significant reduction to the exclusion you may want to take action to arrange for a consultation with a good Oklahoma City estate planning attorney to be certain that your assets are situated optimally. And, do not wait to the last quarter of the year. At that point, the planning line will be long and you will be asked to take your place at the end of the line.
Larry Parman
Author, President and Founding Attorney
Parman & Easterday
Since founding Parman & Easterday in 1985, Larry has led over 1,000 free, community-service education programs and helped more than 10,000 Oklahoma families go from putting off their estate plan to getting it done. His goal for every client is the same: to become the person their family calls "the one who took care of everything."
Larry is the author of three books: The Straight Shooter's Guide to Estate Planning; Estate Planning Basics; and Guiding Those Left Behind in Oklahoma. He served as Oklahoma's Secretary of State and Secretary of Commerce, and his firm is the only member of the American Academy of Estate Planning Attorneys in the state.
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