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Even 'permanent' estate tax exemptions aren't permanent

Taxes are a very common discussion where estate plans are concerned. Creating an estate plan that maximizes the legacy one can give to their heirs and beneficiaries is something that is surely sought after on a regular basis. After the American Taxpayer Relief Act was passed, the hype over the tax exemption seemed to die down quite a bit. Why; the act set the estate tax exemption at a permanent level of $5 million indexed for inflation. But how permanent is permanent?

It has been only a few months, but changing the "permanent" status has already been proposed. The most recent budget proposal submitted this past week by President Barack Obama includes a suggestion that the exemption amount be lowered to $3.5 million per person. Also included in the budget proposal was the suggestion that assets above the exemption amount be taxed at 45 percent. If passed, the changes would go into effect in 2018.

When it comes to state or federal tax laws, the most permanent aspect is that they are not absolutely permanent. This is why estate planning attorneys are constantly researching new legislation and even proposed legislation and exactly why establishing an estate plan is not a one-time event.

After major life changes such as a marriage, a new baby or even the purchase of a new home an estate plan should be revisited. Updating estate plans after these events is something that often gets put on the back burner. Even more, when no major life changes occur, people often think that updates are not necessary. However, an estate plan should be revisited on a regular basis even when life seems to continue on uneventfully.

Source: The New York Times, "Estate Planning Remains a Moving Target Under the New Tax Law," Paul Sullivan, April 26, 2013

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