• 11
  • February
    2012

In 2001, the Bush administration passed a temporary law that is about to expire. The year 2012 is the last one that Congress has to act before the law reverts back to the way it was in 2000. So what is this law and why are we talking about it?

It is the unified credit for gift and estate taxes, and it can have a big effect on how people with a larger amount of wealth deal with their estate planning. When a person passes, their estate is taxed. The unified credit for gift and estate taxes essentially provides a shelter for a certain amount of your estate, protecting it from being taxed.

That shelter amount is set at $5.12 million this year, but without any action by lawmakers, it could revert right back down to $1 million. The change would cause a lot more tax for a lot more estates, and the tax rate could even be as high as 55 percent.

Although Congress could take the necessary action to address the issue at any moment, what it reminds us of is the importance of having regular discussions with your estate planning attorney. One way that many people reduce the value of their taxable estate is through gifts. Gifts made under $13,000 per year -- the current allowance -- to any individual.

Estate tax laws are subject to change at any time which is why it is so important to keep open communication with an experienced estate planning attorney who can advise you on the best way to ensure that your legacy is what you want it to be.

Source: The New York Times, "A Year to Stay Flexible on Tax Plans," Jan M. Rosen, Feb. 8, 2012