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Julie Garber

Revisiting 2012 Estate Tax Predictions

By November 19, 2012

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On January 3, 2012, I posted the following four estate tax predictions for the coming year - each prediction is shown in bold and the current result is shown in italics:

  1. In this presidential election year, no changes will be made to federal estate taxes, gift taxes or generation-skipping transfer taxes. So far this is true, with only the short lame-duck session remaining for Congress to act, or not.

  2. The number of states that collect an estate tax or inheritance tax will decrease by at least one. This is in addition to Ohio, which will see its state estate tax disappear in 2013. I actually underestimated this prediction by one - Indiana acted to repeal its inheritance tax by 2022 and Tennessee repealed its gift tax retroactively back to January 1 and acted to repeal its estate tax by 2016.

  3. The number of states that will increase their state estate tax or inheritance tax exemption will be at least two. This is in addition to Illinois, where the state estate tax exemption will increase to $4 million in 2013, and Maine, where the state estate tax exemption will increase to $2 million in 2013. This prediction was right on: Indiana's inheritance tax exemption for Class A beneficiaries, including parents, children, stepchildren, grandparents, grandchildren and other lineal ancestors and lineal descendants, was retroactively increased from $100,000 to $250,000 for deaths occurring in 2012, and Tennessee will increase its estate tax exemption from $1 million to $1.25 million beginning on January 1, 2013.

  4. The number of states without a state estate tax or inheritance tax that implement such a tax will be zero. This prediction was also right on. Of course, if the federal estate tax laws are allowed to revert to the laws that were in effect in 2001, then the pick up tax will return, but this will be due to inaction at the federal level and not anything done at the state level.

Aside from my predictions, other changes were made to state estate taxes or inheritance taxes during 2012:

  • On May 22, Maryland Governor Martin O'Malley signed the "Family Farm Preservation Act of 2012" into law, which reduces the Maryland estate tax rate assessed against Maryland farms valued over $5 million from 16% down to 5% when the property passes to someone who agrees to continue to use it for agricultural purposes. If the property is then taken out of agricultural use within 10 years of the owner's death, the estate tax will be recaptured. The new law applies to deaths occurring after December 31, 2011.

  • On July 2, Pennsylvania Governor Tom Corbett signed legislation that exempts working family farms and some related agricultural commodities from the Pennsylvania inheritance tax. For a complete summary of the new law, which applies to decedents dying on or after June 30, 2012, refer to Changes Made to Pennsylvania Inheritance Tax Laws.

My predictions for 2012 were not too shabby. What's in store for 2013? I'll let you know at the beginning of January.

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