For those of you who resisted jumping off the fiscal cliff the news in the estate planning area is mixed but mostly pretty good. While the rate of tax on federally taxable estates has been raised, most of the uncertainty that we have been living with over the past decade has been lifted, and the key rules have been made definitive.
Perhaps the most important thing is the $5,000,000 personal exemption has not only been retained, but it has been made “permanent”. (A cynic might observe that there is no such thing as “permanent” with Congress.) Actually it has been indexed for inflation so that anyone dying in 2013 is entitled to an exemption of $5,250,000, and that will increase to reflect inflation annually. Effectively, this means that a married couple would pay no estate tax unless the value of their joint estates exceeded $10,500,000 if they died in 2013. Inflation adjustments will be made annually.
The tax rate on that portion of the estate which is subject to federal estate tax has been increased from 35% to 40%. Even though increased, the rate is far from the maximum of recent years which was as high as 55%, and it applies only to those assets in excess of $5,250,000 for an individual and $10,500,000 for a married couple.
And, as mentioned above, when we sit down to create an estate plan, we can now speak with a higher degree of certainty.
–Ken Butera