The American Tax Relief Act of 2012 (ATRA), which took effect earlier this year, contains a number of provisions that may affect your estate plan. Following are highlights of five of the ATRA’s most significant changes:

  1. The tax rate. The federal estate and gift tax rate is now capped at 40 percent.
  2. The exemption. Years of continually adjusting to new federal gift and estate tax exemption levels has now come to an end. The permanent exclusion is now set at $5 million per person. Note that this amount is indexed for inflation from 2001, so the exemption in 2013 is actually $5.25 million per person and $10.5 million per couple.
  3. Annual gifts. The amount that you may gift tax-free has been raised from $13,000 to $14,000 per person, per year.
  4. Portability. The ability of a surviving spouse to use the deceased spouse’s unused federal estate tax exemption of $5.25 million has been permanently extended.
  5. Stepped-up basis. Heirs can now count on receiving a carryover basis in inherited property. The temporary provisions of the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) for 2010 are now permanent, which is a significant benefit for those who inherit property that has appreciated in value.

Experience tells us that despite the “permanency” of these provisions, Congress likes to change estate taxes from time to time. A properly drafted estate plan and ongoing communication with your attorney can save you and your family a significant amount of money. Now is the ideal time to meet with an experienced estate planning attorney to ensure that your assets are in order. Armstrong & Lamberti, PLLC has more than 20 years of experience in this complex area of the law and can provide you with the detailed, personal attention you need.

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