No one likes to discuss death. It’s a topic often avoided (and for good reason). The thought of having someone there one minute and gone the next is extremely difficult to comprehend. But as tough as it is, the conversation needs to happen.
Speaking from experience, a little discussion and planning ahead of time goes a long way in reducing headaches and heart aches.
In the spirit of deadly discussions, let me begin with a rhetorical question.
Should I Die This Year or Next Year?
I understand this is a strange question. I don’t expect many new visitors to find my site by asking “Should I die this year or next year?”
It’s not a common question typed into Google. (Sidenote: I would love to see the most ridiculous questions ever typed into Google. Example: I just typed “What noise do teletubbies make when you touch their tummy?” <- long story)
But maybe this will soon change along with the federal estate tax changes. You have all probably heard of the expiring Bush era tax cuts, but I’m guessing few of you have heard of the changes to estate taxes.
2013 Federal Estate Taxes
When you’re dealing with a death in your family, the last thing you want to think about is what fraction of the estate goes to the United States government. What’s remarkable is that depending on WHEN you die, that fraction could be significantly higher (or lower).
Right now the current estate tax exemption is set at $5,120,000 at a tax rate of 35%. Assuming none of your assets are sitting in a trust, life insurance, or a wealth transfer product – roughly 1/3 of your assets will be passed to Uncle Sam rather than Aunt Nancy.
If new legislation isn’t passed, then the estate tax will revert back to 2001-2002 levels which is set at $1,000,000 and a rate of 55%.
I know a lot of you are probably thinking this is a good problem to have.
“If I had 1 million dollars, I wouldn’t give a damn.”
1. You would absolutely give a damn.
2. There are more millionaires than you think. So don’t think this won’t ever affect you.
Notice what I said above: “If new legislation isn’t passed…”
How many important decisions has our glorious government made over the past 2 years? Does anybody remember The Super Committee? Congress can’t agree on anything…Which is why I see “nothing happening” as a realistic outcome. If I was a betting man, I would say they will vote to extend the current law.
A Look At The Numbers
I had every intention of breaking down the numbers for you to show what the difference would be between dying this year versus next year; but Miss Blinkin is yelling at me to go to bed. If I don’t abide, she may answer the title question for me. :/