There was a lot of hand-wringing within the estate planning community as the country prepared to go over the fiscal cliff. If this would have taken place a significant number of Americans would have suddenly become exposed to the federal estate tax.
And, many who were already exposed would be faced with the prospect of even more severe asset erosion.
This is because the estate tax exclusion would have gone down from $5.12 million to $1 million on New Year’s Day, and the maximum rate of the tax would have shot up to 55%. The top rate was 35% last year.
Fortunately for those who value wealth preservation these figures are not going to be holding sway.
Under the terms of the budget agreement the maximum rate of the federal estate tax in 2013 has been set at 40%. The exclusion is going to be $5.25 million after an adjustment for inflation.
The estate tax exclusion is going to continue to be portable in 2013. What “portability” refers to in this context is the ability of a surviving spouse to utilize the unused portion of the unified exclusion that his or her deceased spouse was entitled to.
When you digest all the information above you see that the only changes were a 5% increase in the top rate and a $130,000 increase in the exclusion.
It should be noted that things are always subject to change. You would do well to get together with a good estate planning attorney on an annual basis to evaluate your financial situation in relationship to the estate tax parameters that exist during that year.
- Nursing Home Costs Can Erase Your Legacy - March 23, 2020
- Estate Taxes Can Erode Your Legacy - March 9, 2020
- When Would You Use an Irrevocable Trust? - February 24, 2020
