One piece of the fiscal cliff’s puzzle that we don’t seem to hear about as much is the estate tax cliff.  Most likely because this one in particular really only does affect the wealthy.  However, LIMRA recently estimated that over 12% of US households (which is over 14 million households) could become subject to estate taxes and extra liability if this new law goes into effect.  To give you an idea of the amount of households that are currently affected today, the number only stands at 2% (about 2.4 million households).  That is a huge jump!

To give you an overview, today (2012) the exclusion amount (the amount of the estate not subject to estate tax) is at $5.12 million and the top marginal tax rate is at 35% after that.  The 2013 exclusion amount goes all the way down to $1 million and then increases the marginal tax rate all the way up to 55%!

It also doesn’t take a rocket scientist to realize that these kind of estate tax changes could cause huge spikes in life insurance.  For many years, estate planners have used life insurance with the 2% of the super wealthy to create tax-free lump sums to help alleviate the estate tax issues.  Now that this could potentially affect 5 times as many people, expect to see and hear a whole lot more about life insurance in the near future.

Life Insurance Education