With the estate tax reinstated by the 2010 federal tax law, now may be an opportune time to review estate tax strategies with clients. The current tax rate is in place only until the end of 2012, and after that, estate tax rates could rise.
As Congress increasingly focuses on the national debt, rising income and estate taxes may be unavoidable. That is because spending cuts alone are unlikely to solve the debt problem. In recent weeks, the Government Accounting Office released a report outlining a number of government programs where duplication could be reduced. In addition, the Administration’s 2012 budget proposal cites more than 200 cuts to eliminate or reduce spending, according to the White House. Still, the savings are only a fraction of the nation’s deficit.
With more than half — 55% — of the federal budget locked into entitlement programs, and the debate over deficit reduction ongoing in Congress, the issue of rising debt is not likely to be resolved soon. And it’s possible that raising income tax rates may be part of the solution.
Before current tax laws change, clients may want to learn more about tax efficient strategies, including estate planning ideas that could be implemented today.
For example, clients may not realize that a 529 college savings plan could reduce a future tax burden, particularly for grandparents, who may lower the amount of their estate by setting up and funding a 529 plan.
With the potential for taxes to rise in 2013, reducing estate assets can be a valuable strategy.