If you’ve been planning your estate, then you’re no stranger to the ominous feeling of waiting for Congress to act on the tax front. The clock is ticking.
Returning readers are probably already familiar with the uniquely ominous circumstances surrounding the end of 2012. Still, some things bear repeating early and often. This is one of them.
As noted in a recent SmartMoney article titled “Preparing for ‘Taxmageddon,’” the Bush tax cuts were set to end in 2010. Then, in a grand, last minute gesture, a “compromise” was struck to extend similarly generous provisions until the eve of 2013. In reality, this compromise was just a way of buying time and kicking the can down the road.
While the resulting tax benefits, although fleeting, have been truly great for some estate planners, the country is evermore divided and stuck in an election mindset. Nevertheless, the clock continues to tick away toward December 31, 2012, and, well, “Taxmageddon.”
Regardless of which party takes the executive and legislative branches in November, it is far from clear that the “lame duck” Congress will be able to do the work in time. In fact, the likelihood of increasing taxes will simply default because the executive and legislative branches simply will not hammer something out.
So, how could this scenario ruin estate plans, if it comes to pass? I recommend reading the original article in SmartMoney and while you are at it, journey over to an older article in The Wall Street Journal here, titled “Preparing for the End of the Bush Tax Cuts.”
Teaching point: everything tax-wise is on the line these days. Since it is nearly impossible to say which way things will tip, plan accordingly.
Reference: SmartMoney (May 23, 2012) “Preparing for ‘Taxmageddon’ ”