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Estate, GST and Gift Tax After
The American Taxpayer Relief Act of 2012
The American Taxpayer Relief Act of 2012 (ATRA), enacted January 2, 2013, has brought some welcome permanency to estate, gift and generation-skipping transfer planning.
ATRA made permanent the unification of the estate, gift, and generation-skipping tax rate structure; thus,
1) The unified federal estate and lifetime gift tax exclusion amount - the amount a taxpayer may transfer without incurring estate, gift or generation-skipping taxes - is $5,000,000, adjusted for inflation after 2011.
2) The 2012 amount was set at $5,120,000. Distributions exceeding the exclusion are subject to a graduated tax regime with a 40% maximum rate.
ATRA also set the income tax rates that apply to estates and trusts at 15%, 25%, 28%, 33% and 39.6% for taxable years beginning after 2012.
Further, ATRA also made permanent the so-called "portability" provision. If a spouse dies after 2011 without exhausting his or her estate and lifetime gift tax exclusion amount, the surviving spouse may be able to gift against that amount. This latter provision does not apply to gifts given to grandchildren, i.e., generation-skipping transfers.
Finally, ATRA made permanent the deduction for state estate taxes, the repeal of the qualified family-owned business interest deduction and certain conservation easement rules.
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