2013 Tax Update

Update for 2013 – Gift, Estate, and Generation Skipping Transfer (GST) Tax Exemptions have been increased and made “permanent” (meaning that the current law has no built-in expiration date and will stay as written until Congress decides to change the rules again), as of January 1, 2013. These changes provide you with more options for gift and estate tax planning, but they also require you to clarify your priorities and be honest about your willingness to deal with administrative tasks.

Four major tax benefits in the American Taxpayer Relief Act of 2012 are summarized in the table below:

  • Amount exempt from gift and estate tax and generation skipping transfer (GST) tax is $5.25 million in 2013.

  • Maximum tax rate on gift, estate, and generation skipping transfers increased to 40% in 2013.

  • Surviving spouse continues to be able to use any gift or estate tax exemption unused by the deceased spouse under the portability rules in 2013.

  • Carryover basis rule for lifetime gifts and the stepped-up basis rule for estates are permanent.

Gift, Estate, and GST Tax Rates and Exemptions

 

2009

2010

2011

2012

2013

Maximum Gift Tax Rate

45%

35%

35%

35%

40%

Maximum Estate Tax Rate

45%

35%

35%

35%

40%

GST Tax Rate

45%

0%

35%

35%

40%

Annual Exclusion

$13,000

$13,000

$13,000

$13,000

$14,000

Gift Tax Exemption

$1,000,000

$1,000,000

$5,000,000

$5,120,000

$5,250,0001

Estate Tax Exemption

$3,500,000

$5,000,000

$5,000,000

$5,120,000

$5,250,0001

Portability

No

No

Yes

Yes

Yes

GST Exemption

$3,500,000

$5,000,000

$5,000,000

$5,120,000

$5,250,0001

1=$5 million adjusted for inflation.