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On December 31, 2012 the United States Senate passed what I like to refer to as the “Great Cliff Compromise” and sent the bill to the House for its blessing. Knowing the House as being one of the most unpredictable entities within the U.S. government, speculation abounded as to whether the blessing would come or whether the bill would be cursed upon and sent back or rewritten in which case the Senate would curse it. However, for reasons that will likely remain with Representative House Leader Boehner and is compatriots, on January 1, 2013, the House voted for the Great Cliff Compromise.
Now, many lawmakers, policy wonks, and concerned citizens don’t consider this so “great” or a “compromise.” They aren’t seeing fireworks of the pretty, sparkly, ooo-ahhh, kind. Instead, they have visions of gray skies and storms in their heads.
The disdain lies with the fact that spending cuts were not addressed, and neither was the debt ceiling. And it is the issue of spending cuts that causes as much, if not more, contention between Democrats and Republicans than increased taxes on the affluent. I’d love to see a poll on that one without “both” and “neither” being offered as a choice. Sorry, I digress… So the brow-furrowing continues because over the cliff we went, landed without too many bumps or bruises, but with another nosedive staring America in the face in two months.
Still, the Shark Free Zone is most concerned, at least for now, with that part of the parachute involving estate planning. While both Congressional chambers have a lot of work to do to prevent the nosedive, the uncertainty surrounding the federal lifetime estate tax exemption is primarily gone. Some pieces about annual gifting and GSTT indexing must be ironed out but according to esteemed colleagues, they are “being worked on.” Therefore, the lifetime federal estate tax exemption remains at $5 million and indexed for inflation and the marginal rate of the excess of $5 million increased from 35% to 40%.
If you were worried because you didn’t have a chance to gift your gazillion dollars away in 2012, you may have time… If you were concerned that you gave a bazillion dollars away but that, upon your death, your loved ones would still have to give more than half to Uncle Sam in taxes, you can relax, probably…
BUT, if you’ve not done anything, such as downloaded a power of attorney and had it signed and notarized; confirmed life insurance designations weren’t minor children; or talked with family…even the most harmonious of U.S. Congresses won’t be able to help your loved ones. Not comparing myself to the likes of Biden or McConnell by any stretch of the imagination, may I suggest a few New Year’s Resolutions?
- Revisit your existing plan; or
- Create your plan; or
- Talk to your family about wanting a plan.
You have at least 363 days to go…or until the next bipartisan Congressional vote decides to repeal the law and lower the tax rate…
