The American Taxpayer Relief Act of 2012 changes the estate / gift tax laws as follows:
tax exemptions. The 2012 exemptions for estate, gift and generation-skipping transfer taxes remain in effect and
are indexed for inflation.
- The 2013 exemption is $5,250,000, which is $130,000 more than the 2012 exemption.
to this annual indexing, you can expect to acquire additional amounts of estate, gift and generation skipping transfer tax
exemptions each year.
- For example, if inflation is annually 2.4 percent, the exemption would be approximately $6,340,000
in 10 years.
- Gift tax exclusion. The annual gift tax exclusion is also indexed to inflation.
This year, the annual gift tax exclusion is $14,000 per recipient ($28,000 per recipient for a married couple).
tax rates. The tax rates for estate, gift and generation-skipping transfer taxes are increased from 35 percent (under
the 2012 law) to 40 percent.
- Portability. The portability provisions (allowing spouses to combine
their respective estate tax exemptions) remain and have been clarified to improve their effectiveness.
provisions. All other transfer tax provisions from the 2001 and 2010 tax acts will continue.
period. Most important, these provisions are “permanent” as opposed to merely temporarily extended for
President Barack Obama’s most recent budget proposal includes significant changes to transfer
tax provisions that would:
- Dynasty trusts are limited to 90 years;
- Grantor trusts, including intentionally
defective irrevocable trusts (IDITs), will be limited for estate planning;
- Valuation discounts in gift transfers will
be limited; and
- Grantor retained annuity trusts (GRATs) will require a minimum of a 10-year term.
contact us to ascertain whether your current estate plan provides for, and takes full advantage of, these changes.