Congress finally serves up some certainty on federal estate and gift taxes

And they said it couldn't be done! 

Just hours before the 112th Congressional session expired, the House passed the  American Taxpayer Relief Act, keeping us from falling off the  fiscal cliff - for now, anyway. 

The law also ends years of uncertainty about federal gift and estate taxes, removing much of the guesswork that has plagued estate planning efforts over the past years. Its main provisions:

1. Sets the lifetime gift and estate estate tax exemption at $5 million per person, with annual adjustments for inflation. Married couples may combine their exemptions to pass double that amount.(The 2012 rate is $5.12 million; the number will be readjusted for 2013 and beyond as necessary.)
2. Increases the top tax rate on taxable estates from 35% to 40%. The minimum rate is now 37%.
3. Retains the current portability provision, which allows a person to utilize the unused portion of the deceased spouse's lifetime exemption.

Obviously, this is good news for most families, who now do not have to worry about estate or gift taxes for the foreseeable future. Although this legislation is "permanent" in the sense that it is not designed to expire as the Bush tax cuts were, bear in mind that no legislation is indelible or unchangeable. 

Federal estate tax considerations are, of course, only one reason to engage in good estate planning. A sound estate plan allows you to achieve numerous goals beyond tax avoidance, including:

1. Avoiding or minimizing STATE estate taxes. Although Florida does not impose its own estate tax, many other states do. Many Floridians, after the death of the first spouse, or as a result of their aging or incapacity, relocate to live closer to family members in other states. Without proper planning for this possibility, the new state may impose estate tax.
2. Protecting assets from the astronomical cost of long-term care.
3. Ensuring that any assets you leave behind go to the people you want to get them, and stay out of the hands of those you don't want to get them.
4. Avoiding estate challenges after you are gone.
5. Avoiding probate.
6. Naming the people you want to manage your estate after you are gone.
7. Keeping the courts out of your affairs and reducing the likelihood of court-ordered guardianship in the event of incapacity.
8. Designating someone to handle your financial affairs if you become disabled.

Another aspect of the new law that has gone largely unreported in the past 24 hours is the establishment of a long-term care commission. The 15-members will include consumers, older adults, caregivers and care providers appointed by the President and Congress. The group will be tasked with finding viable financial solutions to the growing long-term care crisis.