Estate and Gift Tax Update

posted on February 01, 2013 by Willingham & Cote

by Lee B. Reimann, Estate & Gifts

We hope this New Year finds you well!  On January 2, 2013, President Obama signed the American Taxpayer Relief Act of 2012.  As part of this legislation, several estate planning issues were decided. 

  • The Act permanently provides for an inflation-adjusted $5 million exclusion from estate tax for each individual beginning January 1, 2013.  Individuals with net assets under $5 million do not need to do any estate tax planning.  If a husband and wife have a combined estate of under $5 million and currently have two separate trusts with the same distribution scheme, this is an excellent time for them to simplify their planning.  We suggest that they may want to create one joint trust.  A joint trust avoids having to evenly distribute assets between two trusts.  Also, with a joint trust, a surviving spouse will not need to file annual tax returns or accountings upon the death of the first spouse.  A joint trust allows the surviving spouse to continue to have access to all of their combined assets with no additional administration.
  • The Act also makes “portability” between spouses permanent.  If a husband and wife have a combined estate of between $5 and $10 million, portability now provides for an opportunity to fully use both spouses’ estate tax exclusion.
  • Lastly, the estate and gift tax rate is now 40%.  If an individual made a large gift in 2012 anticipating the repeal of the gift tax lifetime exclusion, have no fear.  The lifetime exclusion is still in effect, and everyone can continue to make gifts as the lifetime exclusion increases with the inflation adjustment.  (The 2013 limit is $5,250,000.)  If you wanted to make a gift in 2012 but did not have the opportunity to do so, we can help you make this gift in 2013.

Tax changes are not the only reason to review your estate planning documents.  If it has been more than three years or you have had a major life change, we strongly encourage you to review your documents.  If you have any questions or would like to schedule an appointment, please feel free to call Lee B. Reimann at (517) 324-1045, Tara L. Bachner at (517) 324-1051 or our assistant, Laura J. Riley, at (517) 324-1029.

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