Estate Planning Update July, 2013
1. 2013 Annual Gift Tax Exemption: $14,000 per donor, per donee.
2. 2013 Gift and Estate Tax Exemption: $5,250,000 per donor, indexed for inflation.
3. Marital Deduction for Transfers to U.S. Spouse: Unlimited.
4. 2013 Generation Skipping Tax Exemption: $5,250,000 per donor, indexed for inflation.
5. Top rate for Federal Estate, Gift and Generation Skipping Taxes: 40%.
6. Federal Legislation: My favorite part of the American Taxpayer Relief Act signed by the President on January 2, 2013 is the use of the word “permanent.” The act extended the 2012 temporary exemptions but increased the top rate by 5%. The legislation also continued the concept of portability which gives married couples some planning alternatives. While the President included continued estate tax reform in his tax proposals, I doubt that we will see any meaningful change soon. If you have been waiting for certainty, now is the time to revisit your estate plan.
7. State Legislation: Other than the Arizona Trust Code which became effective January 1, 2009 and a few cases clarifying creditor’s rights to assets in trust, there have been few material changes in Arizona law. Therefore, only revocable trusts prepared prior to 2005 should be reviewed. If you have not reviewed your plan since 2005, please contact me to schedule a review.
8. Planning Opportunities: The current exemption amounts, low valuations and the low IRS rate tables for July setting the minimum amount of interest (mid-term rate is 1.22%) and discount rate used to value annuities and remainder interests (7520 rate is 1.4%) make outright gifts, gifts in trust, grantor retained annuity trusts, charitable lead trusts and sales with deferred payments extremely attractive. These rates are trending up monthly. In certain structures you or your spouse may be able to retain a portion of the asset transferred. Depending upon a person’s desires and portfolio, there are several techniques available to reduce or defer estate tax obligations and if you are interested in exploring these options at this time, please contact me.