As you all know, the election is finally over! However, the result is that the situation in Washington is little changed.
President Obama has been reelected, with an electoral vote of 332 to 206, and a popular vote of 51% for President Obama and 48% for Governor Romney. The Democrats have a slightly larger majority (+2 seats) in the Senate; the Republicans have a slightly smaller majority (-4 to -9 seats) in the House.
As a result, unfortunately, there is no clear view of where things may be headed concerning the estate tax and taxes, generally.
The estate tax exclusion, currently $5.12 million, is scheduled to return to $1 million at the end of this year when the current law “sunsets.” But, this is just a small piece of the puzzle with which the politicians in Washington are grappling. Here is a list of items changing on January 1st without Congressional action:
- “Sunset” of the “Bush tax cuts” (which had been extended by TRA 2010);
- “Sequestration,” or across-the-board spending cuts to most discretionary programs, per the Budget Control Act of 2011;
- Sunset of the Alternative Minimum Tax “fix” and return to tax year 2000 AMT thresholds;
- Expiration of the 2% Social Security payroll tax “holiday;” and
- Expiration of the federal unemployment benefits extension.
Most of these changes will have an immediate impact on the growth of the economy. In fact, the non-partisan Congressional Budget Office has projected that current law (without modification) would throw the U.S. economy temporarily back into recession.
As the estate tax changes are only a small part of the impending changes, it is very difficult to predict what might happen. President Obama and the current Congressional leaders are meeting this week. A compromise may yet happen this year, during the “lame duck” session of the 112th Congress. If not, the newly-elected 113th Congress will begin on January 3, 2013. Of course, I’ll blog about developments when they arise.
Throughout the year, Academy members have been kept abreast of strategies to take advantage of the current situation, through educational sessions (at our Spring and Fall Summits and Classroom Conference Calls) and through a coordinated rollout of marketing materials.
Stephen C. Hartnett, J.D., LL.M.
Associate Director of Education
American Academy of Estate Planning Attorneys, Inc.
9444 Balboa Avenue, Suite 300
San Diego, California 92123
Phone: (800) 846-1555