We had a lot of uncertainty regarding the estate tax parameters for 2013 as the political powers that be negotiated a deal that would prevent the country from going over what was being called the “fiscal cliff.”
The wrangling and finger-pointing went down to the last minute, but a deal was finally reached when the Senate passed a resolution on New Year’s Eve and the House of Representatives followed suit the next day.
If no new legislation had passed the estate tax exclusion would have been $1 million in 2013 and the maximum rate of the federal death levy would have been 55%. In 2012 the exclusion was $5.12 million and the maximum rate was 35%.
Because of this new legislation the rate of the federal estate tax maxes out at 40% in 2013. The estate tax exclusion will remain the same but there can be an adjustment for inflation. The exact adjusted estate tax exclusion figure for 2013 has not yet been made available by the IRS.
The gift tax is unified with the estate tax. This means that the value of nonexempt gifts that you give throughout your life coupled with the estate that you pass along with your loved ones will be taxed if the combination exceeds the exclusion amount.
This is still the case in 2013 and nothing has been changed with regard to the lifetime gift tax exclusion. The generation-skipping transfer tax will also carry the same rate as the gift tax and the estate tax.
If you would like to learn more about the estate tax and tax efficiency strategies that are often implemented to mitigate exposure contact our firm for a free consultation by clicking this link and filling in the form: Free Estate Planning Consultation