A relatively small number of Texas residents are subject to estate taxes in 2012, as only those with estates worth more than $5 million are generally taxed upon their deaths. According to the Tax Policy Center, a total of about 3,240 estate tax returns were submitted in 2011.
However, if lawmakers and the Obama administration are unable to agree on a new budget, this figure could swell considerably as only those with estates worth less than $1 million would be forced to pay estate taxes. The Tax Policy Center estimates that order 52,000 Americans would be subject to such taxes in 2013 if such a change occurs. Furthermore, the maximum tax rate for qualifying estates would jump from 35 percent to 55 percent.
Most Republican and some Democrat members of Congress want to completely abolish the estate tax, while President Obama has proposed setting the maximum tax rate to 45 percent and lowered the exemption level to $3.5 million. The TPC estimates that around 7,500 estates would be affected under that compromise.
Understandably, many of those who would be affected by these estate tax changes may find the issue confusing, especially considering the fact that both the top estate tax rate and exemption level have been modified seven times since 2000. This has left experts concerned that this will create widespread frustration and anger as the government repeatedly changes its tax regulations and forces thousands of Americans to completely readjust their financial strategies in order to secure the financial security of their heirs. “You really need some stability to make the kind of assumptions needed for good planning,” explained one financial planner.
Estate taxes can be incredibly complex, making it crucial for any wealthy Texas residents to contact a qualified attorney specializing in tax law who can help them make important decisions regarding the future of their assets.
Source: Newsmagazine Network, “Fiscal Cliffhanger: Uncle Sam keeps changing the estate tax rules,” Jim Erickson, Dec. 10, 2012