The estate tax guidelines for 2013 have been established now that we have gotten past the budget stalemate that was keeping everything in limbo. In the final analysis those who favor tax relief have cause for concern, but the compromise was not entirely unfavorable.
Last year the maximum estate tax rate was 35%, and the exclusion was $5.12 million. This exclusion figure was derived from a base of $5 million in 2011 and a subsequent adjustment for inflation.
The parameters of the estate tax have changed slightly as a result of this budget deal. The exclusion is remaining the same at its base, but the adjustment for inflation has been released by the Internal Revenue Service. The 2013 estate tax exclusion is $5.25 million.
We have a hike in the top rate of the federal estate tax. This rate was 35% throughout 2011 and 2012, but now we are faced with a 40% rate. This 40% rate also applies to the gift tax, which is unified with the estate tax.
The generation-skipping transfer tax will also carry the 40% maximum rate.
If the country had gone “over the cliff” as it were, the top rate of the estate tax would have shot up to 55% and the exclusion would have been just $1 million. Clearly, this significantly lower exclusion would have exposed many more people to the tax.
In the final analysis nobody wants to pay a 40% death tax. However, harsher outcomes were possible, and there are things that you can do to position your assets with tax efficiency in mind.
To gain an understanding of your options simply arrange for a consultation with a licensed and experienced estate planning lawyer.