Congress worked through the Holidays to avert the looming fiscal cliff. The result was the American Taxpayer Relief Act (“ATRA” for short).
The impact on Estate & Gift Taxes was a permanent increase in the lifetime exemption to 5 million dollars. Furthermore, the exemption is indexed for inflation, so the effective exemption for 2013 is 5.25 million.
In addition to the increase in the exemption, the top tax rate is set at 40% as opposed to 55% under the old laws.
Finally, portability was made a permanent part of the law as well. Portability is the ability of a surviving spouse to have use of the unused portion of the first spouse’s exemption. This effectively gives married couples a 10 million dollar exemption. Please keep in mind, to preserve this exemption, an estate tax return must be filed upon the death of the first spouse, and subsequent remarriage can have an effect on the use of this credit.
