Deborah Jacobs, the house estate-planning expert at Forbes, has a nice roundup of the rules that Congress set to begin in 2013.

When all was said and done, not much changed.

• The Lifetime Exemption has been now codified at $5 million, plus inflation. This agreement preserved the non-permanent status quo that had existed on the lifetime exemption, and represented a major concession by the Dems, who had sought to lower the transfer tax threshold by about 30%. The outcome will keep the tax bar high enough to avoid imposing liabilities on the vast majority of Americans’ estates — including most large estates.
• The Unlimited Marital Deduction has been made permanent. So, essentially, a married couple’s lifetime exemption will remain twice that of an individual. Unsurprisingly, we heard nothing about expanding this benefit to include same-sex spouses.
• Exemption Portability remains. So, a portion of the personal lifetime exemption that is not used at the end of one’s life may be passed along to one’s spouse. Again, nothing new for same-sex spouses.
• The Top Rate has gone up narrowly, from 35% to 40%.
• The Annual Exclusion on gifts has risen to $14,000, per recipient.

(Please note that this is not legal advice: Speak with a licensed and qualified attorney in your own jurisdiction about your own unique circumstances before making any important legal decisions.)

Here’s how the NYT is reporting tonight’s late Senate deal on the estate tax:

The estate tax would also rise, but considerably less than Democrats had wanted. The value of estates over $5 million would be taxed at 40 percent, up from 35 percent. Democrats had wanted a 45 percent rate on inheritances [sic] over $3.5 million.

The WSJ is on the same page. More details when they emerge.

Happy New Year!

It’s really going down to the wire, isn’t it? I attended an estate planning conference in New Brunswick last week, and the speakers —  practicing T&E lawyers from around New Jersey — were preoccupied with the uncertainty about this. Nobody seemed to think that the end result would be anything other than a modest lowering of the exemption amount from its present level. But one speaker articulated a growing sense among his colleagues that any deal on transfer taxes would ultimately be an afterthought, and might not be as deliberate as specialists in the practice — or their clients — would like.

If the various constituencies in Washington can’t reach a Grand Bargain before the end of the year, will federal transfer-tax exemptions go over the fiscal cliff? Maybe, says Forbes‘ Deborah Jacobs. But, chances are, the scheduled automatic drop to $1M (which could, theoretically, ensnare a lot of estates) would be corrected retroactively in any eventual deal. Right now, the individual exemption stands at $5.12M, and when one considers that a married couple typically enjoys twice that amount in combined exemptions, it is clear that estate taxes are a non-issue for the overwhelming majority of Americans. At the end of the day, that probably won’t change.

In observance of Estate Planning Awareness Week (seriously), Forbes has pulled together a useful collection of links to recent articles about wills, trusts, and other estate planning instruments. Obviously, I cannot stand behind the mountain of advice (legal and otherwise) to which the article links, but it’s a pretty extensive and interesting collection.

Nobody knows. Congress has yet to take up the issue of extending or amending the current law, which is set to expire on December 31. If no legislation is forthcoming, then the lifetime exemption will fall to a million dollars, presumably ensnaring a large swath of the upper middle class– and even some of the house-poor or farm-poor in places that have seen property values skyrocket over the last generation. Simultaneously, the top rate on taxable assets will jump to 55 percent. The smart money is on some kind of legislative action after the election. My suspicion is that Congress will remain split, and the exemption will come down from its current $5.12M, but will still be set high enough to avoid hitting the vast majority of taxpayers. Beth Cohn has a nice overview of the current legal framework, and possible 2013 scenarios, over at JD Supra.