North Carolina Estate Planning Blog

Now is the Time to Consider Tax Issues as 2013 Draws Near

A recent press briefing with Press Secretary Jay Carney touched on tax issues that will affect every American in 2013. Right now, Americans are ill-prepared for the approaching drop off the “fiscal cliff.” As tax cuts are about to expire in the New Year, how will individuals be affected?

The Senate has passed a bill to the House of Representatives; with the House’s approval the bill will extend tax cuts for 98% of American individuals. This is only a temporary solution that the majority of decision makers in both political parties, Democrats and Republicans, are in favor of. If the bill is passed, there will be a temporary reprieve for most taxpayers, and more time for persons with assets in excess of $1 million to create or update their estate plans to prepare for the time when these tax cuts do expire—because they will. Right now, the luxury of time is not a guarantee.

The Obama Administration is not in favor of continuing the tax cuts for high income earners, the 2% of Americans earning over $200,000 a year. Americans earning under $200,000 ($250,000 for married couples) annually would benefit from the tax cut extension, if approved. The gift and estate tax exemption is about to drop with the shift as well–down to $1 million. Individuals can seek to reduce estate taxes by the use of certain trusts, avoiding a loved one’s legacy from being exhausted in taxes. As of this writing, the maximum estate tax rate is set to rise to 55%, which would mean that more than half of a decedent’s assets over the exemption amount would go to the government.

The main message of the press briefing: “The President will not sign a bill that extends tax cuts for the top 2% with an extension of the Bush-era tax cuts,” according to Press Secretary Jay Carney. Additionally, the President is bringing a proposal for $1.6 trillion in new taxes for businesses and high-earners. The combination of expiring tax relief and new taxes will make strategic tax planning and proper trust administration the keys to a strong estate plan in 2013. Those who are making year-end changes to their estate plan or who are just forming one for the first time must plan accordingly in order to preserve assets for their beneficiaries. 

Trackbacks (0) Links to blogs that reference this article Trackback URL
Comments (0) Read through and enter the discussion with the form at the end
205 Providence Road, Chapel Hill NC 27514
Phone: 919.493.6351 • Toll-Free: 800.201.0413 • Fax: 919.493.6355 •