A key part of the American Taxpayer Relief Act of 2012 (ATRA), the new tax law passed by Congress on January 1st, that was not yet known immediately after the passage of the new law has been released by the Internal Revenue Service. The exact amount of the estate tax exclusion for 2013 has been set at $5.25 million.
To understand where this figure comes from you have to go back to the end of 2010 when the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 was passed. This measure put a $5 million estate tax exclusion in place for 2011. It allowed for ongoing adjustments for inflation, and the adjustment for 2012 brought the exclusion up to $5.12 million for that year.
Under ATRA, things stay the same as they were when it comes to the estate tax exclusion. So, the $5.25 million figure that we have this year comes from that original base of $5 million adjusted for inflation. Under ATRA, the maximum rate of the estate tax for estates larger than the exclusion amount has gone up to 40% (from 35%) in 2013.
If you are in possession of assets that do not exceed $5.25 million you are currently exempt from the federal estate tax, but you never know what may happen in the future. Laws could change, and your own financial stuation could improve.
The best way to make sure that you are properly positioned in light of these taxes is to sit down and discuss your situation with an experienced and qualified estate planning attorney.