Changes in Estate Taxes for 2013

Changes in Estate Taxes for 2013

Update 1/7/2013

There has been much talk recently regarding the hypothetical Fiscal Cliff, and the good news is that Congress did indeed pass a bill to avoid it. The personal impact of H.R. 8 will vary from one person to the next, but the changes to estate taxes are a matter to which everyone should pay close attention.

Those who have been, or will be, the beneficiaries of a large estate will be glad to know that the Bush tax cuts on estates have been extended permanently. Without these tax cuts, the lifetime applicable exclusion amount on an estate would have been 1 million, and after that the taxes could have topped out at 55 percent.  At the new rates, the first 5 million for individual estates will be excluded, with a top tax rate of 40 percent applying after that. For family estates, the exclusion is 10 million.

These new rates are permanent, and will be adjusted for inflation. By the year 2020, the exclusion amounts are expected to be adjusted to 7.5 million and 15 million for individuals and married couples, respectively. Another piece of good news is that the exclusions will remain portable between spouses, meaning a surviving spouse can continue to use a deceased spouse’s federal tax exemption.

Even though these changes in estate tax law are beneficial, one should not become complacent. There are many reasons such beneficiaries should still seek financial and legal counsel in order to manage the estate.  Protection will still be needed in order to guard assets from probate proceedings or creditors. Also, even though the need for bypass trusts may be reduced in some cases, there will still be many instances in which they are warranted. For example, if the assets are expected to appreciate in value, if a surviving spouse considers remarriage, or if a bypass trust is already in effect, legal counsel should be sought in order to maintain protection for the estate.

The attorneys at Bethel Law are well versed in estate tax law, and are experienced in protecting estates from litigation, creditors, and other potential pitfalls. With all the recent changes in federal law taking effect in 2013, beneficiaries of estates would be wise to consult a qualified attorney in order to ensure the best protection for their assets.

Comments are closed.