Unless you live under a rock or purposely don’t read, watch, or listen to the news, you’ve heard the term “fiscal cliff.” The term that was coined to refer to the hundreds of tax cuts that will expire at the end of 2012. I like to explain it as the tax version of the story of Cinderella – and January 1, 2012 at 12:00am, the carriage turns back into a pumpkin.
Yet, most of the articles you’ll read and news you will hear is focused on income tax items. What about that seemingly forgotten tax – the estate tax? Well, Forbes.com has a great article about what the current law says (warning – it’s not pretty!) and their prognostication on what will happen with the estate tax in the near future. Click here to read the article.
Of course, I can’t just reference an article about such a hugely important topic to families and business owners without sharing my two cents. Overall, I agree with much of what Ms. Jacobs says in the article. But, there are a few items I think she glosses over quickly that need to be given more emphasis. They are:
- She continually emphasis “rich,” and “wealthy” to refer to those who would be affected and seems to do so in a patronizing tone. I have a few issues with that. First, “rich” and “wealthy” are relative terms and they should also take into consideration more than just what money or assets you have (see what I mean by clicking here to read about Whole Family Wealth). Second, your “estate” for estate tax purposes is likely much bigger than you know (do you have life insurance? It’s included!). Click here to read about what’s included in your estate tax estate. Finally, many business owners will be included in who she considers “rich” or “wealthy” as a result of their business profits “flowing through” to them on their income tax return – whether or not they actually get the profits (if you have questions on what I mean by that, contact me).
- She mentions her belief that “portability” will continue – the ability for a surviving spouse to use their deceased spouse’s unused estate tax exemption. BUT, she (and most of the folks I see writing about portability) fails to mention that to claim that unused exemption amount you must make an election on a timely filed estate tax return. If you don’t, you lose it. Yet, many folks won’t think to do so and will lose the unused exemption forever. Having a comprehensive estate plan in place can guarantee you get the maximum exemption – that’s just one reason why planning is SO important.