So, unless a miracle occurs, at the beginning of next year, the Federal Estate Tax will revert to the rates that were in effect ten years ago, on January 1, 2001. By the numbers, this means that estates worth $1,000,000 will be taxed at 41%, those above $3,000,000 would be taxed at 55%, and the tax rate would be 60% for estates worth more than $10,000,000.
While much of the media coverage recently has been about the Bush tax cuts, and their extension, the fact is that most of what we’re hearing is about income tax. Estate Taxes, however, were also reduced by those cuts, which means those numbers above will go back into effect in January.
This is important, because tax rates could affect things like life insurance decisions and estate planning in general. This is why many life insurance brokers recommend joint survivor life insurance which is a kind of coverage that provides the heirs of a large estate with a way to pay estate taxes without having to sell off family assets.
If you are fortunate enough to have the sort of wealth these tax cuts affect, please take the time to consult your life insurance provider and make sure you’ve adequately prepared your estate for your heirs to easily take over.
Even if you’re NOT so wealthy, remember that even modest estates should be protected.