Estate and Gift Taxes 2013

Posted Friday, January 18, 2013 by John S. Palmer

The so-called “fiscal cliff” legislation enacted on January 1st contains important estate and gift tax provisions.

For example, it establishes a unified gift and estate tax lifetime exclusion amount for 2013 of $5,250,000. To be more accurate, it keeps the exclusion amount at $5 million, adjusted for inflation after 2011. On January 11, the IRS announced the inflation-adjusted figure for 2013.

The estate gift and tax rate for 2013 forward is 40% for all taxable gifts and estate transfers after the exclusion amount is reached. (The annual gift exclusion remains in place, though, and a taxpayer may gift up to $14,000 per person in 2013 tax-free and without any reduction in his or her lifetime exclusion amount.)

The deduction for state death taxes is continued as an apparent permanent replacement of the state tax credit that was allowed for many years but phased out in 2005.

The Generation Skipping Tax rate is also set at 40% and the GST exemption amount is the same as the estate tax exemption amount.

The new law also makes permanent the estate tax “portability” rules previously enacted on a temporary basis in 2010. “Portability” allows a surviving spouse to reduce his or her estate taxes by claiming the unused portion of a deceased spouse’s estate tax exclusion amount. Portability is not automatic, though; a portability election must be made on a timely-filed estate tax return for the deceased spouse’s estate, even if a return would otherwise not need to be filed. Temporary regulations previously adopted by the IRS to simplify the valuation of property when an estate tax return is only being filed to make the portability election, and addressing multiple portability elections for surviving spouses who remarry, are expected to be made permanent now.

If you have any questions or would like to schedule an appointment, please call us at (425) 455-5513, toll free at (877) 455-5513, or info@palmerlegal.com.