What you need to know about estate tax in 2013:
Question: What are the recently changes to estate tax in 2013?
One should be familiar with the federal estate-tax exclusion amount for estates of people who die. The amount varies by year and in 2013 it happens to be $5,250,000. This figure is provided by the IRS each year. Last year in 2012 it was only $5,120,000.
It should also be noted that the federal exclusion for estate tax is now is permanently set at $5 million HOWEVER IT IS INDEXED FOR INFLATION. The indexing for inflation requires the Internal Revenue service to make an announcement each year as to the new amount after they apply an acceptable inflation rate. Ryan Jarus, principal of Jarus & Co CPA of Irvine, CA, confirmed for us that exclusion rate for 2013 is $5,250,000.
Mr. Jarus also noted the federal gift and generation-skipping transfer tax exemption is the same as the estate-tax exclusion amount. The top tier federal estate-tax rate on the biggest of decedents’ estates is now 40%. That is an increase form the 35% which was applied in 2012. Transfers from one spouse to the other typically are tax-free, this is true in California as well.
“Portability” of the estate tax exclusion is also a hot topic. Under the new estate tax law portability of estate tax exclusions is not permanent for husband and wife. Ryan Jarus, CPA explains that portability makes the federal estate-tax exclusion amount “portable” between a husband and wife. If one spouse dies, the other typically can get the deceased spouse’s unused exemption amount without having to set up trusts or other tax-saving maneuvers. “This will save taxpayers on estate tax planning fees” notes Mr. Jarus.
For more information you can contact Jarus & Co CPA of Orange County by visiting their website: Jarus & Co.