After years of uncertainly and even anticipation regarding how Congress would handle federal estate taxes, the American Taxpayer Relief Act was remarkably a “non-event.” The Act essentially extended, or made “permanent” (with one notable exception for very wealthy people), the rules and exemptions for estate, gift and generation skipping transfer taxes that were established in 2010 under the so-called Tax Relief, Unemployment Insurance, Job Creation Act. The 2010 legislation established new tax rates and “unified” the estate tax with the gift tax and GST tax exemptions. The federal estate tax exemption was originally set at $5,000,000 in 2010, with the provision that this amount would be indexed for inflation beginning in 2012. The 2013 exemption for federal estate taxes is $5.25 million. (It is important to remember that these are federal estate taxes only and do not include similar state taxes, such as inheritance taxes).
The above mentioned exception is that for estates valued over the exemption amount, the estate rate has been increased by 35% to 40%, insuring that multi-million dollar estates will continue to engage tax attorneys for estate planning services. Even if you are not yet a millionaire, it is important to consider whether and how wills, trusts for children, special needs trusts, living trusts, powers of attorney, etc. fit into your overall family or individual financial plan.
