The tax law changes enacted in 2010 under the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act made significant changes to estate and gift tax laws for 2011 and 2012. However, these changes will expire at year’s end barring an act from our legislators on Capitol Hill. Estate planning attorneys and their clients find themselves in the same predicament they experienced at the end of 2010. Back then, it appeared that exemption amounts would decrease to pre-2000 levels beginning on January 1, 2011. Again, if Congress fails to act (and because this is a presidential election year such a fear is warranted) the estate and gift tax world will resemble that of 1999.
Important Changes for 2013
ESTATE TAX EXEMPTION
The estate and gift tax exemption is $5,120,000 for 2012, but will decrease to $1,000,000 in 2013.
GENERATION-SKIPPING TRANSFER TAX
The GST tax is currently $5,120,000 but will decrease to approximately $1,390,000 in 2013
Estate, gift and GST tax rates are capped at 35% in 2012 but will increase to 55% in 2013
Estate tax exemptions were made portable in 2011-2012. This means that one spouse can port his or her unused exemption amounts to the other spouse on the first spouse’s death. This portability option will expire in 2013.
The uncertainty of the next six months is a valuable time for creative estate planning and gifting opportunities. Many clients with substantial wealth may find outright gifts very attractive. They can transfer some of their wealth during life and enjoy the lower tax rates and higher exemption amounts available for 2012. Additionally, many estate plans should be reviewed to ensure that there are no unintended tax consequences under the new law.
If you would like an experienced Estate Planning Attorney to review your documents or help you navigate the consequences of the new law, call Burt + Clerc. Our attorneys would be happy to assist you.