Number of Estate Tax Payers Set to Jump by 1,580% in 2013

Slowly, people and the media are picking up on the impending estate tax situation (see these posts https://theplannedgivingblog.wordpress.com/tag/2013-taxes/ for the details).

The latest IRS estimates on numbers of taxable estates is as follows:

  • 2012 – 3,300 estimated estates paying any estate tax
  • 2013 – 52,500 estimated estates paying any estate tax

That is a jump by 15.8 times or 1,580%.  Seems like a lot to me.

Interestingly, individuals don’t seem to be taking advantage of 2012’s very favorable estate and gift tax laws.  See this article:  http://www.businessweek.com/news/2012-07-13/rich-passing-up-10-million-opportunity-to-gift-tax-free.

Very interesting phenomena.  Right now, there is very clear indication that individuals potentially facing estate taxes should do some sophisticated estate planning today – gift up to $10 million to children or even grandchildren.  Take advantage while the law lasts!  But, no, people are just not acting on it.

Maybe everyone assumes the law will get fixed – which is very likely.  But, not before we have at least a few months of limbo wondering if the 2001 law of $1 million lifetime exemption/55% federal estate tax rate will snare some unsuspecting tax payers.  Just like the 2010 estate tax repeal year where several billionaires just happened to pass away and avoid billions upon billions of estate taxes, the opposite could happen to average Joe’s who scrimped and saved their entire lives and might end up paying well more than their fair share.  It is like musical chairs – it all depends on where you are when the music stops.

For nonprofits, my advice stays the same: start planning seminars on estate planning for the fall!  You never know when people are going to adjust their estates and this fall we may see a rash of last second estate planning to avoid what it coming.  Why not get a fresh message about including your nonprofit in one’s estate plans in front of your prospects just as they might be changing their plans?

2 comments

  1. O revenue, revenue, wherefore art thou Revenue? That is the more interesting question than simple numbers.

    “It should come as no surprise that there was a dramatic drop in the number of federal estate-tax (FET) returns filed in calendar year 2010. According to the IRS, only 15,191 returns were filed compared to 33,515 that were filed in 2009. The drop, of course, reflects the increase in the lifetime exemptions from $2,000,000 in 2008 to $3,500,000 in 2009. Consider further that the number of returns filed in 2001 when the exclusion was $675,000 stood at 108,071”. (from University of Wisconsin) Just to give some perspective as to the number of Federal Estate Tax filings in recent years. The numbers that Business Week quotes seem quite a bit high compared with past data.

    There are a number of intersecting issues here (just to mention a few): the explosion of wealth among a very small percentage of United States citizens, how that wealth is being transferred by lifetime transfers and estate plans, where will Congress seek to retain and/or expand revenue options, and the general political climate concerning the taxation of individuals and estates.

    If I had been asked in 1986 to guess where the Federal estate tax exclusion would be today, I would have said $1 million. With Citizens United and intense lobbying efforts, it would not be surprising to see a $25 or $50 million Federal Estate tax exclusion in five years and perhaps 1,000 Federal Estate Tax returns.

    Jonathan, thank you for raising the issue.

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