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Estate, Gift, & Generation-Skipping Tax News
The American Taxpayer Relief Act of 2012 (“2012 Act”) was passed by Congress on New Year’s Day 2013 and has now been signed into law by President Obama. The 2012 Act makes permanent transfer tax provisions originally effective only for 2011 and 2012. This stability is most welcome. Of course, there is no guarantee against further changes but the 2012 Act should stabilize the estate tax, gift tax and generation skipping tax exemptions and tax rates, for the foreseeable future, as follows:
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Tax
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Exemption
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Top Rate
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Estate Tax
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$5,250,000
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40%
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Gift Tax
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$5,250,000
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40%
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GST Tax
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$5,250,000
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40%
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In addition, the 2012 Act makes permanent the concept of “portability” introduced as a temporary measure in 2010. This concept generally allows married couples to leave $10,500,000 free of estate tax. Further, there was concern that people who made significant gifts in 2012 might incur estate tax on the gifted items under what was referred to as a “claw-back” under the Internal Revenue Code. The 2012 Act eliminated concern about recapture of the benefits of 2012 gifts. Also, up to $1,070,000 of farm or business real estate can receive a discount estate tax valuation. In 2013, the annual gift tax exemption increases to $14,000 per donee.
In the final analysis, fears that estate, gift and generation-skipping transfer taxes would revert to the $1,000,000 exemption and tax rates of 10 years ago were unfounded. Instead, the favorable 2012 provisions were made permanent, with the exemptions indexed for inflation.
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