estate tax 1/1/2013

Slowly, people and the media are picking up on the impending estate tax situation (see these posts http://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?

Did you know that December 31, 2012 is not only New Year’s eve this year, it is also the eve of tax doomsday?

I already started mentioning this oncoming situation in February, so check out my overview of the issues: http://theplannedgivingblog.wordpress.com/2012/02/05/2012-incomeestategift-tax-update/.

For those who want more than just an overview, check out this excellent article on the Planned Giving Design Center: http://nyct.pgdc.com/pgdc/perfect-storm-prospective-expiration-bush-tax-cuts. What I love about the article is the list of 17 negative tax consequences that will kick in on January 1, 2013 should Congress and the President not act on this.

In truth, Congress will do something – either a partial or whole fix or a “kick the can” temporary solution. What fundraisers and planned giving officers in particular need to be aware of is the opportunity that many older supporters should be seeing their estate planning attorneys before the end of the year.

What can you do? Offer tax/estate planning update seminars, send email alerts and other educational pieces, stir up the pot. People don’t change their estate plans often – if this is the year that frightening tax doomsday scenarios push your prospects to revisit their plans, you want them remembering your organization in those conversations.