I came across this article in U.S. News and World Report that I thought you might find interesting. There are significant changes on the horizon involving estate taxes:
It’s hardly the fiscal cliff, but estate taxes are set to face their own day of reckoning next year. The current rules allow estates of up to $5.12 million to avoid all estate taxes, and that level can be effectively doubled for a couple. Large estates that do face taxes must pay a levy of 35 percent, which is low by estate-tax standards. Gift taxes have also been relaxed.
Unless Congress takes action, the $5.12 million exclusion will fall to $1 million effective January 1. And that 35-percent tax rate will jump to 55 percent. Financial advisers have been urging their wealthier clients to seriously consider using the current gift and tax rules to transfer assets to heirs this year. Given the complexity of preparing holdings for transfer, especially illiquid assets such as property and private business equity, time is running short for such tactics.
Since estates include the values of primary residences, private businesses, and, in some cases, life insurance, this could affect 12.5 percent or one-eigth of all U.S. households. LIMRA, an insurance marketing firm adds:
“If Congress fails to act, 14.7 million U.S. households would have a potential estate tax liability,” LIMRA said. “The average tax due for these families would be $1.4 million.”
The article goes on to say:
If the existing generous rules were maintained, which is not considered likely, there would still be potential estate taxes due on 2.4 million U.S. households, and their average tax at the 35-percent rate would be $2.4 million. About 43 percent of them do not have enough life insurance to cover these tax obligations, LIMRA said, and would still owe an average of $3.1 million after their life insurance proceeds had been applied to their estate taxes.
You can read the entire article here: http://money.usnews.com/money/blogs/the-best-life/2012/10/03/estate-tax-changes-would-affect-more-than-the-super-rich