Estate Planning 2013: Changes That May Affect You

February 15, 2013

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On January 2, 2013, after much debate, President Obama signed the American Taxpayer Relief Act of 2012 (the Act) into law. The Act makes significant changes that will affect many estate plans, but it also provides important estate planning opportunities. The following summary describes key provisions of the Act.

Estate Tax Exclusion

Commencing on January 1, 2013, the Federal Estate Tax exemption has been indexed for inflation and increased from $5.12 million in 2012 to $5.25 million in 2013. There continues to be an unlimited marital exemption between spouses, which provides for no estate tax due upon the death of the first spouse. It is not until the death of the surviving spouse that an estate tax, if any, would be due.

Furthermore, the Act increases the tax rate from 35% to 40% for decedents dying on or after January 1, 2013 with estates in excess of the exemption amount. It is important to note that the Commonwealth of Massachusetts has continued to apply a $1 million threshold for the state estate tax at a rate between 3% and 16%, depending upon amount of the decedent’s assets.

Federal Gift Tax Exemption

The Act permanently unifies the federal gift tax exemption amount and the federal estate tax exemption at $5.25 million in 2013, indexed for inflation. Thus, you may gift or devise as much as $5.25 million without incurring any transfer tax liability. However, ...

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by: Todd C. Ratner

Live Well, Daily Hampshire Gazette
Winter 2013

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