The American Tax Relief Act of 2012 (“ATRA”) came into effect on January 2, 2013. ATRA includes new federal estate, gift and generation-skipping-transfer tax (“GST”) legislation that is generally applicable to decedents’ estates, and generation-skipping transfers and gifts made, after December 31, 2012. Listed below are a few highlights that may be applicable to your estate planning and/or gifting for 2013.
The applicable exclusion for 2013, the estate amount that is exempt from federal gift and estate tax, is $5,250,000, adjustable for inflation. Any estate amounts over $5,250,000 are subject to estate and gift taxes. In the future this amount will be subject to a cost-of-living adjustment.
The top estate tax, gift tax and GST tax rate are all 40%.
The concept of portability is now permanent. Portability allows a decedent to port the entire applicable exclusion amount of the last deceased spouse. For example, W has a $5.25 million applicable exclusion amount and survives H who dies with a $2 million applicable exclusion amount (meaning H died with assets of $3.25 million). W, now has a $7.25 million applicable exclusion amount. Portability only applies to the “last” deceased spouse and the portability amount is not adjusted for inflation.
For the year of 2013, IRAs rolled over to a charity at death, by a person at least 70 ½ years old, are 100% deductible from the estate tax. In addition, IRAs can be rolled over to charities, by an individual who is at least 70 ½ years old, to receive a charitable deduction annually. A qualified charitable distribution is generally any distribution directly from an IRA to a charitable organization. Qualified charitable distributions from a traditional IRA or a Roth IRA owned by an individual who is at least 70 ½ years old, which would have been taxable are excluded from gross income if made to a tax-exempt organization. The exclusion from income cannot exceed $100,000 per taxpayer per taxable year.
If you have any questions relating to creating or updating your gifting and estate plan, please contact one of our Estate Planning attorneys.
Contributed by: Mieke V. Weissert