Some individuals were
in a panic late last year as the favorable estate and gift tax rules were set
to expire in 2013. With Congressional action uncertain, no one knew how their
plans might be affected.
To the relief of
taxpayers and planners, most of the estate rules changed only slightly. The
estate and gift tax exemptions will be $5,250,000 in 2013, up from $5,120,000
last year, and adjusted for inflation going forward. The top tax rate for estates
and gifts exceeding these amounts will be 40%, up from 35% last year, but
better than the 55% rate that would have been the law had Congress not acted.
And a surviving spouse will still be able to access the unused portion of the
estate exemption of the deceased husband or wife
It’s important to
note that the exemption applies to both inheritances and lifetime gifts. The
cumulative combined “transfer” exemption will be $5,250,000 whether the money
is given away before or after you die. In addition, you can give away up to
$14,000 annually to as many recipients as you like without tapping into your
lifetime transfer tax exemption
Average folks with
estates far under $5 million might wonder how any of this applies to them. But
the reality is that everyone needs an estate plan. The backbone of your estate
plan, a will, is an essential legal tool intended to ensure that your final
wishes are honored. A will can also indicate who will take care of your
children should you pass away, and how the children can access their
inheritance. If you want to include your favorite charity in your estate plans,
there are strategies available to benefit both family and charity alike.
Estate planners might
be breathing a sigh of relief, but don’t let the current rules lull you into
complacency. Contact us and your attorney for a review of your estate plan
today.
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