Written on December 28, 2012 – 7:00 am | by Laura West
Many readers of this blog are likely following U.S. news stories regarding what has been dubbed the “fiscal cliff” – i.e., the potential economic fallout arising from U.S. federal tax increases, spending cuts and other measures that will come into effect in 2013 should U.S. politicians not be able to reach an alternative deal prior to the end of the year.
A recent Reuters article has provided a summary of many of the issues related to these tax increases, spending cuts and other measures. Included in this summary is the U.S. estate tax, the status of which is described as follows:
“The estate tax, which applies to assets passed onto heirs, currently stands at 35 percent, after an exemption level of $5 million. With no action, the tax will rise to 55 percent, after excluding the first $1 million of value. Obama wants to raise the tax to 45 percent, with a $3.5 million exemption, but some high-profile Democrats have come out in support of keeping the current tax and exemption levels. Many Republicans want a repeal of what they call the ‘death tax.’”
As of the date of this blog, it remains to be seen whether U.S. legislators will be able to reach a compromise with respect to these matters, and if so, what impact this compromise will have on the U.S. estate tax.
As my colleague, Corina Weigl, has blogged about previously, U.S. estate tax issues can be relevant for some Canadian resident testators. As a result, it will be important to follow the “fiscal cliff” discussions – and any actions taken by U.S. legislators with respect to the U.S. estate tax – in order to determine any relevant U.S. estate tax planning that needs to take place on a going forward basis.