I was just reading an article published in March 2011 edition of Wisconsin Lawyer hoping to find indications on what Wisconsin intends to do with respect to an estate tax. Unfortunately, I only discovered confirmation of uncertainty regarding estate taxes.
In December 2010, the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act (TRA 2010) was passed. This law effects my area of legal practice and all of our lives. With respect to estate planning, the law increased the federal estate tax exemption to $5 million for 2011 and 2012. Therefore, if your estate is valued at less than $5 million at the time of your death, and you die this year or next year, your estate will likely be free of estate tax.
Since December, I’ve been waiting for Wisconsin’s response to this law. Currently, Wisconsin has no estate tax. However, prior to TRA 2010, Wisconsin law provided that as of 2011 the state would be collecting a form of estate tax by virtue of a federal state death tax credit. Given the current law, such a credit does not exist and therefore allows Wisconsin to continue to have no estate tax for 2011 and 2012. The article in Wisconsin Lawyer indicates that there are no bills pending in the Wisconsin Legislature at this time to enact an estate tax.
The good news is that no estate tax applies to your estate if your estate is less than $5 million. The bad news is that you will need to die within the next two years. As the law stands currently, as of January 1, 2013, the estate tax exemption will decrease from $5 million to $1 million per person. When calculating the value of your estate, be sure to include the death proceeds of any life insurance you may own upon your own life.
As with any tax law, there are many other technicalities and specifics I could continue to explain regarding TRA 2010. I hope this was helpful in giving a summary of the state of affairs with respect to estate taxes. However, the question remains: How is one to plan with a temporary tax law in place? Personally, I’m planning to live longer than 2 years and and am planning for a million dollar federal estate tax exemption. Of course, I cannot guarantee either one of these plans. Like they always say . . . only two things in life are certain: Death and Taxes.