When the fiscal cliff deal was reached we finally got some clarity with regard to the estate tax parameters for 2013.
“Going over the cliff” as it were would have resulted in a harsh scenario for those who have achieved a bit of financial success. The estate tax exclusion would have been trimmed down to $1 million, and the maximum rate of the tax would have gone up to 55%.
In 2012, the estate tax exclusion was $5.12 million. There is a base of $5 million that was implemented for 2011 and it is adjusted for inflation annually. The maximum rate of the tax in 2012 was 35%.
After the compromise was reached we have more of the same for the most part with a slight alteration.
The $5 million base exclusion is still in place. The 2013 adjusted amount will be $5,250,000.
The rate of the tax is changing for the worse, but the increase is not as bad as it would have been if the deal had not been consummated. The top rate of the estate tax in 2013 is 40%.
This 40% rate also applies to the gift tax and the generation-skipping transfer tax.
Although the worst-case scenario has been avoided, a 40% tax on the wealth that you have been able to accumulate throughout your life is certainly significant.
If you would like to discuss tax efficiency strategies with an expert, we would be glad to help.
To set up a free consultation with our firm simply click this link and fill in the form: Free Indianapolis Estate Planning Consultation
Mr. Kraft assists clients primarily in the areas of estate planning and administration, Medicaid planning, federal and state taxation, real estate and corporate law, bringing the added perspective of an accounting background to his work.
Latest posts by Paul A. Kraft, Estate Planning Attorney (see all)
- If a Beneficiary Dies During Probate What Happens to the Inheritance? - September 18, 2019
- Is Your Power of Attorney Powerless? What to Do When a Third Party Won’t Honor an Agent’s Authority - September 11, 2019
- Are There Different Types of Special Needs Trusts? - September 4, 2019