So, it is 2013. The dust has cleared, and we have avoided the fiscal cliff for estate, gift and generation skipping transfer tax purposes. What does that mean?
Well, first the facts - The American Taxpayer Relief Act of 2012 provides for the following:
- Federal Estate Tax Exclusion = $5,250,000 (this amount has been adjusted for inflation, and will continue to be adjusted for inflation)
- Federal Gift Tax Exclusion = same as the Federal Estate Tax Exclusion (in 2013, $5,250,000 applies to gifts over the annual gift exclusion amount which in 2013 is $14,000 or $28,000 for a married couple)
- Federal Generation Skipping Transfer Tax (GSTT) Exclusion = same as the Federal Estate Tax Exclusion (like the Federal Gift Tax Exclusion, the GSTT Exclusion is "unified" with the Federal Estate Tax Exclusion
- Portability - in certain situations, if one spouse dies the surviving spouse can use their deceased spouse's unused exemption (note: if applicable, this must be elected on the deceased spouse's estate tax return
- Federal Estate, Gift and GSTT Rates = maximum of 40% (this is up from 5% from last year)
The good news is that the above changes will require Congressional action to change again meaning that they are permanent so long as Congress does not decide to change them later.
So, for many families and business owners, estate planning attorneys can do flexible exemption planning to help ensure your estate does not have to pay taxes at your death, or the death of your spouse.
IMPORTANT NOTE: If you live or own property in Connecticut you may be subject to Connecticut Estate Taxes at your death, even if you are below the Federal exclusion. The Connecticut estate tax exemption in 2013 is currently $2,000,000. Also, Connecticut has a gift tax with a gift tax exclusion amount of $2,000,000 as well. The Federal Laws enacted above are separate from Connecticut Law.So, if you have property below the Federal Exemptions, it does not necessarily mean you are not subject to Connecticut Taxes. You should review your situation with your CT estate tax attorney.
If you would like to avoid unnecessary taxes regardless of the size of your estate, you should work with your Connecticut estate tax attorney or CT estate planning attorney to help ensure you are protected. If you live in Connecticut, feel free to contact us to set up a consultation. Our contact information is here.