2013 Estate Tax Essentials

Estate taxes underwent some major changes at the beginning of 2013. Thankfully, we now have more clarity and permanence than we had over the past decade.

We provided a 2013 Estate Tax Update to our clients on our website and by newsletter early in the year. But I think reminders and summaries can be useful.

Here is a summary of the current estate, gift and generation skipping tax essentials for 2013:

• Exemption Equivalent: $5,250,000 (minus lifetime adjusted taxable gifts)
• Inflation Indexing: Yes (rounded to the nearest $10,000)
• Portability of unused exemption to spouse: Yes (by timely election on Form 706)
• Rate: 40% (flat rate on taxable estate above exemption)

• Lifetime Gift Tax Exemption: $5,250,000 (total lifetime taxable gifts)
• Inflation Indexing: Yes (rounded to the nearest $10,000)
• Annual Exclusion: $14,000 (increased by inflation indexing in $1,000 increments)
• Rate: 40% (flat rate on gifts above exemption)

• GST Exemption: $5,250,000 (minus lifetime GST exemption used)
• Inflation Indexing: Yes (rounded to the nearest $10,000)
• Portability of unused exemption to spouse: No
• Rate: 40% (flat rate on GST transfers above exemption)

• Estate Tax Exemption: $4,000,000 (not scheduled to rise)
• Inflation Indexing: No
• Gift Tax: None
• Portability of unused exemption to spouse: No
• Rate: Varies (effective rate up to around 28.5%)

In future months, I plan to highlight the spousal portability election and the variance in state estate tax laws by jurisdiction.