The Estate Tax. Many people call it the death tax. No matter what you call it, it's one of many taxes lawmakers are looking at when it comes to the fiscal cliff.
Many of those "in the know" believe the estate tax will be used as a bargaining chip on both sides of the cliff.
According to Politico, "Conservatives still want to repeal the tax, which briefly vanished nearly three years ago, only to be reinstated by Congress and President Barack Obama at the end of 2010 as part of the two-year extension of the 2001 and 2003 tax cuts. And many Democrats are still fighting to make the tax structure less generous."
Clearwater Estate Lawyer Linda Griffin explained, right now the estate tax exemption is $5.120 million and the tax rate is 35%. If we go over the cliff, next year the exemption drops to $1 million and the estate tax rate goes up to 55%.
Griffin said while most people may not have a $5 million estate, many people could approach the million dollar mark. She added, "People have their home, they may have some life insurance they got at work, and a 401K, and that could bring them pretty close up there before they know it."
There are three options being discussed right now according to Politico:
- a plan to maintain the current rate, which has scattered support in both parties;
- a White House backed-plan for a 45 percent rate with a $3.5 million exemption, which would hit about 7,200 estates;
- and a conservative plan to end the tax entirely.
Any deal is likely to include an estate tax exemption somewhere between $3.5 million and $5 million, and a 45% estate tax rate, according to Andy Friedman of Washington Update.
Guess we'll have to wait and see.