Have you been putting off your estate planning due to uncertainty in the tax law? Then you’ll be happy to hear much of the uncertainty has been eliminated by the American Taxpayer Relief Act of 2012.
Here are three rules the Act made permanent, beginning in 2013:
- The basic federal estate tax exemption is $5 million, adjusted annually for inflation. For 2013, the exemption is $5.25 million, meaning you can transfer assets up to that amount, estate tax-free, to your heirs under your estate plan or through gifts during your lifetime.
- “Portability” can increase your exemption. Portability is an election you make as an executor to apply the unused portion of one spouse’s basic exemption to the second spouse’s estate. The potential benefit: no estate tax on $10.5 million of assets.
- The maximum estate tax rate is 40%, an increase from last year’s 35%. Keep in mind that’s the federal tax rate. Your state may also impose an estate tax, and additional taxes may be due if you own property in other states.
Improved clarity paves the way for updating estate plans. Contact us to schedule an appointment for a tax review of your wills, trusts, beneficiary designations, and exposure to state taxes.