The Federal Estate Tax
The only thing consistent about the federal estate tax has been how much it has been changing since 2001. The two key components of this change have been the tax rate and the value of assets an individual can own at death before the federal estate tax applies. This amount is the Unified Credit Amount (“UCA”), and is often referred to as the exemption amount.
The UCA and tax rates have progressed as follows:
Year UCA Tax Rate
2001 $675,000 55%
2002 $1 million 50%
2003 $1 million 49%
2004 $1.5 million 48%
2005 $1.5 million 47%
2006 $2 million 46%
2007-2008 $2 million 45%
2009 $3.5 million 45%
2011 $5 million 35%
2012 $5.12 million 35%
2013* $1 million 55%
*Under the current state of the law, the UCA will revert to the 2002 amount and the rate will revert to the 2001 rate.
Where we go is anyone’s guess at this point. The Romney Camp seems to lean toward repealing the federal estate tax in its entirety. President Obama seems to be favoring a UCA of $3.5 million with a 35% rate of tax. We’ll be keeping an eye on things to see where they shake out. We’re certain there is much uncertainty to sort through for 2013. We encourage you to keep that in mind as you plan and review your estate planning documents and remember to keep as much flexibility as possible so that your estate plan can self adjust to the uncertain federal estate tax climate.
New Jersey Estate Tax
Unlike the feds, the folks in New Jersey have been tied to the 2001 federal levels and seem unlikely to be changing. The New Jersey UCA is $675,000 and the tax on assets exceeding that amount is imposed at graduated rates ranging from about 5% to a maximum rate of 16%. By way of example, the New Jersey state tax on a $1 million estate is almost $37,000.
In addition to the Estate Tax, New Jersey also imposes an Inheritance Tax. The Inheritance Tax is imposed at varying rates ranging from 11% to 16% and is based upon the value of property transferred to certain classes of beneficiaries.
Dopkin Law Firm advises clients on the intricacies of business and tax law matters. To discuss these or other issues with attorney and CPA Matt Dopkin, contact us at 215-519-4269 or via email at firstname.lastname@example.org.
© 2012 Dopkin Law Firm
This Alert is published by Dopkin Law Firm. It is provided solely as legal information, not legal advice. Legal advice depends, to a large extent, upon the particular facts of a matter. For legal advice, contact your legal advisor.