When Congress agreed on a deal to avert the fiscal cliff in January, it was clear that some of the choices made in the American Tax Relief Act (ATRA) would impact high net worth individuals. Despite that reality, there’s one positive outcome that most experts agree on: Any deal is better than the uncertainty of not knowing.
“The reaction from a lot of our clients was relief,” says Sally Mullen, Chief Fiduciary Officer for The Private Client Reserve. “It provided more clarity around estate planning than we have had in years.”
The fiscal cliff deal also may have helped avert a serious slow down in the economy, says John De Clue, Chief Investment Officer for The Private Client Reserve. “Had nothing been done, we estimate the fiscal cliff would have impacted Gross Domestic Product by as much as 4 percent,” he says. “It would have thrown us into a recession, and the markets would have faced tremendous pressure.”
The new tax rates and rules that came out of the deal won’t solve our economic woes, but De Clue predicts the impact will be limited to just 1 percent of GDP, driven largely by the expiration of the payroll tax cut, which was intended to be a temporary measure, he says.
Now that Congress has passed the fiscal cliff resolution, it’s a good time for high net worth individuals to reassess their investment portfolios, estate planning strategies and wealth management goals to see how the provisions of ATRA might affect them and what they can do to potentially minimize that impact. Learn what the deal may mean for you:
The fiscal cliff deal made permanent the $5.12 million estate tax exemption, and indexed it to inflation. The deal also made permanent a 2010 rule that surviving spouses can use any unused exemptions from their spouse’s estate.