Effect of 2012 Election Results on Estate Planning

Author:  Frank P. Murphy, Attorney-CPA

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The 2012 election is now over.  However, with divided government, the greatest likely result is continuing the estate tax free amount in the $5 to $3 million range.  It is true that currently on the law books there is a “fiscal cliff” with the estate tax free amount being reduced to $1 million in Jan 2013.  The strong likelihood is that the 2013 tax free amount will not be $1 million, but will instead be continued somewhere in the $3 to $5 million range.  This result could occur by passage of budget and/or tax legislation in the lame duck session later in 2012, or could be passed early in 2013 and made retroactive to Jan 2013.  Naturally, the $3 to $5 million predicted level is not a certainty until Congress actually acts to make the change.  However, Congress not acting this year (if they don’t) in the lame duck doesn’t mean anything; it is just as possible that the issue is addressed early next year.

Anyone wanting more information on estate planning and estate taxes in this environment should contact the law firm and ask for a copy of the long article “The New Normal.”  Before the election, occasionally I heard comments on both ends of the spectrum:  those who thought that the estate tax would be entirely eliminated by Congress, and those that worried that the estate tax free level might end up reverting to $1 million (after all that is the current law, until Congress passes some law to continue the current $5.12 million tax free level, or change it to some new amount).  And there were also clients that postponed estate planning, “waiting to see the outcome of the election.”  These considerations can now be put aside, and estate tax planning can move forward, using the “The New Normal” planning ideas.  The problem with waiting for the outcome of an election is that in another 2 and 4 years there is yet another election, and waiting for elections is a prescription for procrastination, for putting off needed planning.  Using “New Normal” ideas in estate tax planning, it is often advisable to implement estate plans that are flexible and that can adjust to new tax free tax amounts.  Please ask for a copy of the “The New Normal” long article for more information.

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