Next year there are some significant changes to the tax laws taking effect on both the state and the federal levels, and these changes are quite relevant to the field of estate planning.
The irony is in the fact that one of these changes is quite favorable to those who are in favor of tax relief and one of them actually raises taxes considerably.
First we will pass along the good news.
We have had an estate tax here in Ohio on the state level and it is still in effect for the rest of 2012. However, legislators have repealed the tax, and this repeal is going to begin next year.
The exemption amount here in Ohio was the lowest in the country at $338,333, so a sizable number of families here will be benefiting from this change.
Now for the bad news: Next year the rate of the federal estate tax is going to go up while the exclusion amount goes down assuming no changes to existing laws are enacted.
At the present time the estate tax exclusion is $5.12 million and the maximum rate is 35%. As the laws are currently written in 2013 the exclusion will be reduced to $1 million while the top rate rises to a rather attention-getting 55%.
These changes exemplify the reason why it is a good idea to view estate planning is an ongoing process rather than a one-time event. Things do not stand still, and your estate plan may be perfectly adequate one day and utterly obsolete the next as laws change.