January 21, 2013

Taxpayer Relief Act — Impact on Estate and Gift Taxes

It’s time to review your estate and gift planning in light of changes to the tax code. The American Taxpayer Relief Act of 2012 specifies a tax rate increase (to 40%), along with a unified estate and gift exemption of $5 million (adjusted for inflation each year), for gifts made after 2012. For 2013, the indexed exemption is expected to be roughly $5,250,000 (up from $5,120,000 in 2012). If we experience higher inflation, these exemptions could increase even more significantly.

Another change is the annual gift tax exclusion amount, which increased from $13,000 to $14,000 per donee.

Further, the act preserves the rules that make the $5 million gift and estate tax exemptions portable between spouses, making it possible for a surviving spouse to use a deceased spouse’s unused exemption on future transfers.

Aside from the higher tax rate, these changes are generally beneficial to our clients. However, each situation must be evaluated to determine whether additional estate and gift planning are in order. Call us today to help you assess your estate, gift, and tax planning strategies.