January 2013, Volume 1, Issue 11


Tips on
Tips For Effective Strategizing Under Changing Legislation

Table of Contents



They kept us guessing right to the end, but on January 1 Congress passed the American Taxpayer Relief Act of 2012 (the "Act"), extending much of the estate, gift, and generation-skipping transfer (GST) tax law. This is good news because it preserves favorable opportunities for individuals and families planning the transfer of their wealth.     


Some of the main points in the Act include:

  • The maximum exemption from federal estate, gift, and GST increased forinflation (the new exemption amount is anticipated to be $5,270,000, per donor/decendent and twice that per couple). It is likely that it will continue to increase annually. 
  • The estate, gift, and GST tax rate applicable to nonexempt transfers increased from 35% to 40%.
  • The "portability" rule, permitting a surviving spouse to inherit a deceased spouse's unused estate tax exemption. This is important because under this rule, a surviving spouse generally may use both her own exemption and decendent exemption to shelter lifetime gifts or bequests at death from federal gift or estate taxes.

Although not part of the Act, the gift tax annual exclusion has increased from $13,000 to $14,000 per donee (i.e., $28,000 per donee for a married couple) as of January 1, 2013.


Interestingly, there is no sunset provision in this Act. This is good news as we won't creep toward uncertainty as we have intermittently over the last 3 years. However, further changes remain possible as the need for additional revenue remains a topic for lawmakers.


In addition to the estate tax laws, the income tax laws were affected by the Act. Below is a simple table outlining the new income brackets and rates:


As we have written in previous newsletters, estate planning is a good idea whether the new estate law impacts you or not. I was surprised the other day when I read that 70% of Americansdo not have a will. The article was written in the context of whether a will is necessary, and opined that it is if you answer yes to any of the following questions:


1. Do you care who gets your property if you die?

2. Do you care who gets your money if you die?

3. Do you care who is appointed guardian of your minor children if you die?


While this is a simplistic approach, it does reflect the truth about basic questions asked if you die without a will.


There was a lot of consternation over the resolution of the "fiscal cliff". But, some people tuned it out because they determined their estates would not be affected either way. I understand this, but estate planning is not just for the rich. Regardless of how much or how little money you have, a will ensures that whatever personal belongings and assets you do have will go to family or beneficiaries you designate. Without a will, the court makes these decisions.


If you have children, a will is a must to ensure that you get to choose your children's guardian. Few people plan to die in the near future, but if you die suddenly without a will, you'll be subjecting your family and loved ones to confusion and anxiety at what is already a difficult time.


Everyone is busy. Finding time to meet with an attorney to discuss finances and health care decisions and talking about distribution of assets at your death can be pushed down on the list of priorities. We endeavor to make it a little easier though and can work with your schedule and timetable to put in place a plan that works for your families' situation. If you haven't done so already, updating, finishing, or starting a plan is a worthwhile goal for the new year.

AboutAbout Pierson & Strachan

Pierson & Strachan P.C. is a law firm serving clients throughout Lake and Cook Counties specializing in estate planning and probate, real estate and land use, business law, and other contract matters. From issues that affect your family to those that impact your business, our attorneys combine cutting-edge technology with personal service to vigorously represent your interests and get you the results you need. Read more>>


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This information may address some questions, but is not intended to be a comprehensive analysis of the topic or legal advice.  Independent tax and legal advice is recommended.