• American Taxpayer Relief Act - Some Things to Consider
  • January 16, 2013 | Author: Kevin F. Bress
  • Law Firm: Pessin Katz Law, P.A. - Towson Office
  • Congress just passed the American Taxpayer Relief Act which now gives some certainty to the estate and gift tax laws.  Below are some things to consider:

    • It is being reported that the estate tax exemption will remain at $5 million (indexed for inflation).  Most people will not be impacted by this tax, though Maryland continues to tax estates exceeding $1M.
    • Portability will remain.  This means that a husband and wife can exempt up to $10M+ potentially.  If one spouse dies without using any or all of his/her $5M exemption, that unused exemption moves over to the surviving spouse.  Potentially, a surviving spouse could pass $10M of assets to family members with no federal estate tax.  No longer will there be a “use it or lose it” for the first to die’s exemption amount.
    • Apparently, the lifetime gift tax exemption will remain “coupled” with the estate tax.  That permits people to make aggregate lifetime gifts up to the $5 million estate tax exemption amount without incurring a gift tax.  For 2013, the annual limit for gifts to one person that may be made without using up any of the $5M lifetime exemption, has risen to $14,000.
    • Now that these large lifetime gifts may continue beyond 2012, those people who may have shied away from making a large gift for fear of some repeal being passed by Congress, are in a position to move ahead with those plans.  Some people who limited their gifts because a spouse did not have sufficient assets to make the gift, may now do planning to effect such a gift.
    • Note that the federal estate tax rate will increase from the previous cap of 35% to 40% and the Maryland Estate Tax can hover around 16% on top of that.

    As a caution, this summary is subject to our seeing the final text of the legislation as passed by Congress and could be further interpreted by future Treasury Regulations.  Consult your advisor before relying on these early interpretations of the new laws.