Contact Us Online

Social Media Karp Law Blog Twitter Facebook

How permanent is the permanent estate tax, really?

4-25-2013 - The American Taxpayer Relief Act provided just that - relief - to estate planners and clients when it was passed by Congress in January 2013. The so-called "fiscal cliff" legislation put to rest the uncertainty that has surrounded federal estate and gift tax since the Bush tax cuts took effect over a decade ago. The Act set the unified federal estate tax and gift tax at $5 million per person, with annual adjustments for inflation (the current rate is $5.25 million). The law allowed married couples to double that exemption, and allowed survivors to use any portion of the deceased spouse's exemption ("portability").

We too breathed a sigh of relief in January, but we did offer this proviso: no legislation is indelible or unchangeable. Our caution was underscored in April with the release of the White House budget proposal for 2014. The proposed budget, if passed, would change the estate and gift tax landscape yet again, as follows:

  • The federal estate tax exemption would decrease from its current level of $5.25 million indexed to inflation, to $3.5 million, not indexed to inflation. Obviously this wider net would scoop up many currently nontaxable estates. 
  • The top tax estate tax rate would increase from 40% to 45%.  
  • The generation-skipping transfer tax exemption would revert to $1 million. 
  • The gift tax exemption would return to $1 million, and the federal and gift tax exemptions would no longer be unified.

Like we said, when it comes to legislation, there is only one constant: change. Look for future developments in the legal updates section of this website.

Back to Elder Law Legal Updates