Estate and gift tax planning just become simpler with the “Fiscal Cliff” legislation passed on New Years Day.  The estate tax exemption and gift tax exemption are now set at $5,120,000 for 2012 and $5,250,000 for 2013, indexed for inflation.  Also becoming permanent is the estate tax “portability” election, allowing a surviving spouse to increase his/her estate tax exemption by the amount of the deceased spouse’s unused exemption. This applies for predeceased spouse who died after 2010 and whose federal estate tax return (IRS form 706) was filed. The top estate tax rate was increased from 35% to 40% for taxable estates larger than the above estate tax free amounts.

Because of the large federal deficit and political uncertainties, there can be no guarantees that these estate tax free amounts and gift tax free amounts will not be lowered in the future.

For more information, read the article linked here to the Journal of Accountancy: http://www.journalofaccountancy.com/News/20137097.htm

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