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Married Couples: New Rules May Dictate Estate Changes

July 17, 2013

Your estate plan may need an update to take advantage of new changes.

Recently, the federal estate and gift tax rules changed for 2013 and beyond. The American Taxpayer Relief Act made permanent changes to our estate tax laws.

Below is an overview of the changes:

  1. The federal estate tax exemption is $5.25 million for estates of individuals who die in 2013. A 40% tax rate applies to the value of an estate in excess of the $5.25 million exemption (the 40 percent rate is lower than the maximum 55% estate tax rate that was in place a few years ago).
  2. Unused exemptions of married individuals are now “portable” – a relatively new concept. Portability creates new planning concepts to consider. Portability means that for married couples, if one spouse dies, any unused federal estate tax exemption can be left to the surviving spouse.
  3. The federal gift tax exemption is also set at $5.25 million for 2013. Back in 2003, the exemption was only $1 million. Gifts in excess of $5.25 million exemption will be taxed at 40% in 2013 (lower than the maximum gift tax rate that was in place a few years ago).

This is all good news, but your estate plan may need an update to take advantage of the changes. There are complex rules for married couples with a joint estate of less than $5.25 million, joint estates that are between $5.25 million and $10.50 million and for those with a joint estate exceeding $10.5 million.

If you have any question about your estate plan or would like to talk with a qualified estate planning advisor, please contact Dave Desmarais, CPA or the KLR Wealth Tax and Advisory Group.

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