We have some clarity now with regard to the estate tax parameters for 2013. The lawmakers in Washington were able to reach an 11th hour agreement, and we did not fall over the dreaded “fiscal cliff” after all.
This deal did in fact impact the federal estate tax.
Under the laws as they existed throughout last year in 2013 the estate tax exclusion was scheduled to go down to $1 million, and the top rate of the tax was set to rise to 55%. This would have been the scenario if we would have fallen over this so-called cliff.
In 2012 the top rate of the estate tax was 35%, and the exclusion was $5.12 million after it was adjusted for inflation.
As it turns out we are not going to be faced with a 55% top rate and a $1 million exclusion. Under the terms of the new budget agreement the estate tax exclusion will still have a base of $5 million that is adjusted for inflation. The IRS has announced that adjusted figure and it is $5.25 million in 2013.
The maximum rate of the estate tax has gone up, but the increase is not as devastating as it would have been if no deal had been struck. The estate tax, the gift tax, and the generation-skipping transfer tax will carry a 40% rate going forward in 2013.
Another bit of good news is the fact that the estate tax will remain portable between a husband and a wife. This means that your surviving spouse would be able to use your exclusion as well as his or her own after your passing. However, to preserve that right, a timely tax return must be filed after the death of the first spouse.
If you have more questions about how the new tax laws affect you and your estate, schedule an appointment with an experienced and qualified estate planning attorney.
Latest posts by Timothy P. Murphy (see all)
- Is It Hard to Contest a Will? - January 15, 2019
- What Are the Rules of Intestacy in California? - January 13, 2019
- Estate Planning for Adult Children Suffering from Alcoholism - January 11, 2019