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Home » Estate Planning » How Does “Cliff” Deal Impact Estate Tax?

How Does “Cliff” Deal Impact Estate Tax?

January 11, 2013 by John Potter

Throughout 2012 there was a lot of uncertainty about the estate tax parameters that would be in place for 2013. Last year the estate tax exclusion was $5.12 million and the maximum rate of the tax was 35%.

These provisions resulted from the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010.

This act was scheduled to sunset at the end of 2012. If Congress had not passed new legislation, the estate tax exclusion would have decreased to $1 million, with an increase in the top rate to 55%.

The American Taxpayer Relief Act of 2012 has prevented this scenario.

In 2013, the estate tax rate has gone up from 35% to 40%. This increase also applies to the generation-skipping transfer tax and the gift tax.

No increase in taxation is going to be welcomed by those who are subject to the estate tax, but a 5% increase is better than a 20% increase.

This increase in the rate is really the only thing that has changed. The tax relief act of 2010 instituted a $5 million estate tax exclusion that is adjusted annually for inflation. This standard remains the same.

The tax relief act also made the estate tax exclusion portable, which means that a surviving spouse could use the exclusion that his or her deceased spouse was entitled to. In 2013 the estate tax exclusion remains portable.

Significantly, the tax relief act just passed is “permanent,” or does not include a sunset provision, which should provide greater certainty in estate planning.

If you are interested in discussing the effect of this law on your planning, contact us for a free consultation. We can be reached electronically through this link: Free Estate Planning Consultation

 

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John Potter
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Filed Under: Estate Planning, Taxes Tagged With: Estate Planning, Estate Tax, Inheritance Planning

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Overall The Potter Firm was very professional. They took what could of been a very complicated process and were able to break it down so it was a lot easier to understand. We are confident we now have made the right decisions in our estate planning. Good firm to work with.

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John Potter has been a real pleasure to work with. He is very knowledgeable and explains things in a very simplistic manner so the average person can understand how/why the laws are written. He is very attentive and asks questions in such a way that not only helps him understand your goals, but also helps you think about what type of goals and expectations you should be considering. Exemplary client service.

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My husband and I selected Ms. Potter to assist with our small business. She responsive and attentive every time I have a question or need assistance, and is extremely knowledgeable and able to answer any legal question I have had. I know I can count on Ms. Potter for all of my business legal needs and I would highly recommend her to anyone needing legal assistance with such.

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