Congress and the President were able to come together at the last minute and avoid the fiscal cliff on January 1st. By passing the American Taxpayer Relief Act of 2012, the government has not only made changes to the tax code but also changes to several provisions that could affect your estate plan. If you have already created an estate plan you may wish to speak to your state planning attorney and ask if any of the changes affect you.
Under the terms of the agreement the federal gift and estate tax exemption remain at just over $5 million per person. This means that in 2012 you can give up to $5.25 million in gifts, either before you die or through your estate, and not be subject to additional taxes.
The law also indefinitely extends estate tax exemption portability. This means that certain married couples may be able to simplify the tax planning provisions of their estate plans. The best way to determine if portability is right for you is to consult with an experienced and qualified estate planning attorney.
40% Tax Rate
The law also establishes that a top tax rate of 40 percent will apply to non-exempt gifts (i.e., over $5.25 million) left behind by people who died in 2013 or later. This rate is applied to the estate tax, gift tax, as well as the generation skipping transfer tax.
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