2013 Estate Tax & Gift Update

Once you’re worth more than a certain amount, your estate will have to pay estate taxes upon your death. Under the 2010 tax law, each spouse can transfer up to $5 million tax-free during life or at death. The tax rate for amounts transferred over the exemption was 35%.

If Congress had not acted, the tax-free amount would have been reverted back to $1 million per person and the rate for most estates would have gone up to 55%. This would have greatly affected the middle class by exposing them to the estate taxes. However, on New Year's Eve and New Year's Day, the Senate and the House of Representatives passed the tax law that made permanent the system that has been in effect for the past two years.

EXEMPTION?: $5.25 million per person

Congress did in fact act, and on January 11, the IRS announced that with the inflation adjustment, the estate tax exclusion amount for deaths in 2013 will be $5.25 million from the $5.12 million in 2012.

RATE FOR AMOUNT OVER? 40%

In 2011 ande 2012, the maximum tax rate was 35%.  If Congress did not act, the amount would have increased to 55%. However, with the new law, the estate tax rate for amounts transferred over the estate tax exemption was increased to 40%.

PORTABILITY FOR SPOUSES

Yes, portability is still available for the surviving spouse. The new law has made portability permanent. This means that a surviving spouse can use the decedent spouse’s unused federal estate tax exemption, enabling them to transfer up to $10.24 million tax-free.