The federal estate tax is carrying a 40% maximum rate at the present time, and the lifetime exclusion is $5.25 million. After the 11th hour passing of the piece of legislation that is now called the American Taxpayer Relief Act of 2012 these parameters were supposed to be permanent.
It should be noted that the estate tax exclusion is adjusted for inflation on an annual basis, so it will not be exactly the same year-by-year.
Many observers who have an interest in estate planning would automatically be a bit skeptical about the “permanency” of these estate tax parameters. There are always those who would like to raise taxes, and on the other side of the coin there are lawmakers who would like to reduce taxation. Some would actually like to see the estate tax repealed altogether.
Because of this ongoing taffy pull changes are always possible.
With the above in mind the president has made details of his 2014 budget proposal available, and this proposal includes a number of different tax increases. The federal estate tax is on the list.
Back in 2009 we had a 45% maximum rate and a $3.5 million exclusion. During that year the lifetime gift tax exclusion was just $1 million.
Under terms of the proposed 2014 budget the estate tax parameters would return to these 2009 levels in 2018.
Without question this proposed budget is just that, a proposal, and there will surely be significant resistance to it. However, this is a situation that should be closely monitored because any changes to the estate tax parameters could be quite relevant to your wealth preservation efforts.