During recent years we have enjoyed many breaks in the estate tax. In 2001, the Economic Growth and Tax Relief Reconciliation Act prompted the gradual increase in the estate tax exemption until the tax was completely repealed in 2010. This move was not permanent; in 2011 the estate tax was back—although not quite in full force, as the anticipated $1,000,000 exemption was raised to $5,000,000, allowing another 2 years of modified estate tax relief.
In 2013, the tax landscape as it relates to estate taxes will change once again, and quite significantly. There are two factors at play here:
- The estate tax exemption, that amount below which no estate taxes are due, is falling from $5,120,000 to $1 million. That means in 2012 an estate worth $5.12 million or less would not be subject to estate taxes but in 2013 anything over $1 million will.
- The maximum estate tax that can be imposed on amounts in excess of the exemption, which is currently 35%, is set to rise to 55%.
It's important to start planning for this shift in estate taxation now. If your current life insurance policy does not have a death benefit that accounts for this change, you may wish to increase the death benefit or add a supplementary policy to your portfolio. If you don't have life insurance all, now's the perfect time to get it.
Not only can your Dallas life insurance policy provide a means for your family to pay their estate tax liabilities, but a policy with a substantial death benefit can provide even more value for your family including replacing lost income, paying off debts, paying for college, and so on. Best of all, a properly structured life insurance policy can be paid out without having to go through probate, giving your heirs quick access to funds. Finally, if you design the policy correctly, you can also ensure that the benefits are not included in your estate for estate tax purposes.
To discuss the many ways a life insurance policy can complement your long-term financial plans and wealth transfer intentions, call us at All About Insurance today. We can help you find a policy issued by a highly rated carrier while also structuring policy ownership and beneficiaries in order to ensure your benefits go exactly where you want them to.