Sharon Ravenscroft Estate Planning Blog
What is happening with the federal estate tax?
Currently, there is no federal estate tax, but that does not mean there is no taxation at death. Instead, right now there is a capital gains tax that can be levied on any assets over $1.3 million (or $3 million for a spouse). Congress has been struggling with trying to adopt a law which will put the $3.5 million estate tax exclusion back in place-- a much fairer tax in most situations. As it stands now, Congress may pass a law that allows estates of decedents who die this year to choose between the capital gains tax and the $1.3 million exclusion or the $3.5 million estate tax exclusion. So, right now, no one really knows whether the tax will remain as it is this year, or change or even what it will be for next year.
How does a married couple plan for that? There is a lot of flexibility in revocable living trusts which can allow for a QTIP or qualified terminable interest trust, or an A-B split or even keep the trust revocable when one of the spouses die. These are complex times but there are simple solutions available when using wills and trusts in your estate planning.