Please see the below summary of major changes to transfer taxes in 2013 from the American Taxpayer Relief Act of 2012 (2012 Taxpayer Relief Act):

  • Tax Rate. The maximum estate, gift, and GST tax rate is 40 percent.
  • Estate and Gift Tax Applicable Exclusion Amount. The applicable exclusion amount for estate and gift taxes is $5 million (adjusted for inflation to $5,120,000 in 2012).
  • Exemption Amount for GST Tax. The exemption amount for GST tax is $5 million (adjusted for inflation to $5,120,000 in 2012).
  • Portability. Portability of the deceased spousal unused exclusion amount for estate and gift tax purposes is made permanent. Portability allows the estate of a decedent who is survived by a spouse to make a portability election and permits the surviving spouse to apply the decedent’s unused exclusion to the surviving spouse’s own transfers during life and at death.

How Does this Impact Me?

Many of our estate planning clients are breathing a sigh of relief because if Congress had not acted on the sunset provisions, effective January 1, 2013, the maximum federal estate tax rate was scheduled to revert to 55 percent with an applicable exclusion amount of $1 million (not indexed for inflation). The 2012 Taxpayer Relief Act brings some certainty to the Tax Code related to transfer taxes that has been controversial over the last few years.

Do I Need to Take Any Action?

If you and your spouse created separate trusts (or a joint trust that “splits” into a family/marital trust upon the death of the first spouse) then we advise that you speak with an attorney at HAO. A simple amendment to your trust may help your family avoid unnecessary and complicated issues associated with your current trust. Other estates may also be impacted by the 2012 Taxpayer Relief Act. Please contact an attorney at HAO at (435)752-2610 if you have a question about the impact of the 2012 Taxpayer Relief Act on your estate and family.