Recently we reported on the outcome of the fiscal cliff deal as it applied to the parameters of the federal estate tax. When the news first broke the exact amount of the estate tax exclusion was not available.
This was because of the fact that the $5 million exclusion that was put into place for deaths in 2011 remained intact, but it is adjusted for inflation annually. Last year the IRS increased the exclusion to $5.12 million after making the adjustment.
We have now learned that the 2013 estate tax exclusion after being adjusted for inflation is $5.25 million.
When you think about this exclusion you must understand that it encompasses taxable gifts as well as the value of your estate.
To reiterate, the top rate of the estate tax in 2013 has gone up from 35% to 40% as we stated in our previous post on the fiscal cliff deal.
$5.25 million can seem like a lot, and it is true that most people don’t have assets that exceed this figure. However, when you consider the value of your home or homes, any inheritances that you may have received over the course of your life, and your own hard-earned savings you could well have resources that fall into taxable territory.
There are also those who own valuable property (such as a farm) that has been in the family for generations. Some people who are in this position would not consider themselves to be wealthy in terms of cash, but their land is worth a lot of money.
If you’re not sure where you stand with regard to the estate tax the wise course of action is to discuss your situation with a licensed estate planning attorney.
Our firm offers free consultations to people here in the greater Indianapolis area. You can set up an appointment by giving us a call at 317-684-1100 or by requesting a consultation after clicking this link: 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.