The amount of the federal estate tax exclusion stands at $5.25 million in 2013. The maximum rate this year is 40%.
What this means is that the portion of your estate that exceeds $5.25 million is potentially subject to this 40% tax. The reason why we use the qualifier “potentially” is because there are things that you can do to gain tax efficiency if you work with a good estate planning lawyer.
There is a caveat to the above however. You can leave behind an unlimited amount of money to your spouse without incurring any estate tax liability. This $5.25 million limit is not applied to married couples.
This does not mean that you don’t need to work with an estate planning attorney to devise a comprehensive plan if you intend to leave behind your resources to your spouse. His or her estate would be subject to the estate tax eventually, so the wise course of action is to take care of things from an estate planning perspective while you are both alive and well so that everything is settled.
It is useful to understand the fact that the estate tax has remained portable after the passage of the American Taxpayer Relief Act of 2012. Portability in this context refers to the legal right of a surviving spouse to be able to use his or her own personal exclusion and the $5.25 million exclusion that was afforded to his or her deceased spouse, providing a total of $10.5 million.
To gain an understanding of the steps that you can take to position your assets in a tax friendly manner contact our firm to set up an appointment. You can reach us electronically by clicking this link: Free Estate Planning Consultation