So far, people have been seeing larger numbers taken out of
their paychecks due to the increase of taxes, and a couple other things are
bound to change with families and small businesses, but we are happy to note
that as part of the tax compromise that was approved, the amount that is
exempted from estate taxes will remain the same as it has been for the past two
years, although the maximum tax rate will rise by 5 percentage points. Those of
us who are seeing an increase in money taken out of our paychecks will have
solace knowing that estate tax will not be changed as a result of this deal.
The American Taxpayer Relief Act (http://www.gpo.gov/fdsys/pkg/BILLS-112hr8eas/pdf/BILLS-112hr8eas.pdf),
which passed in the House by a vote of 257/167, permanently sets the estate tax
exemption at $5 million for an individual and $10 million for a couple. Taking
into account the new adjustments to inflation, these exemptions are estimated to
rise to about $5.2 million for an individual and $10.24 million for couples.
The gift tax and generation-skipping transfer tax exemptions will also remain
the same as last year, adjusting for inflation, and the estate tax portability
provision remains intact.
Although this is good news for most of us without assets in the millions, for those that exceed these amounts, Congress did change one of the prior rules: the maximum tax rate on inheritances above these levels will increase from 35 percent to 40 percent.
Although the bill's provisions should have taken effect on the first of the year when
President Obama had promised to sign it into law, technically for now the
estate tax has reverted to its 2001 level of a 55 percent tax on inheritances above $1 million.
Also the annual gift tax exemption has been raised to from $13,000 to
$14,000 gift per year per person. However, a person can gift more than this
amount each year by declaring a larger gift as part of their lifetime estate
gift tax exemption (which is set at $5 million with inflation adjustments in
the future) by declaring it on a 709 Gift Tax Return.
For more information about this and other California asset protection or
estate planning questions, call LA LAW Center, LLP for a complementary
consultation at 1.877.537.8283.
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