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Light Drizzle Fog/Mist Trusts & Estates Law
Q: I understand that a new law was enacted in January 2013 regarding the Federal estate, gift and generation-skipping transfer tax.
A: Yes, in April 2013, the Treasury Department proposed several changes to the newly enacted Federal estate, gift and generation-skipping transfer (GST) tax law.
The proposed changes include:
• Reducing the current exclusion amount for Federal estate and GST taxes from $5,250,000 to $3,500,000;
• Reducing the current exclusion amount for Federal gift taxes from $5,250,000 to $1,000,000; and
• Increasing the top marginal tax rate from 40% to 45%.
If enacted into law, these changes would become effective in 2018.
Other proposals, which would be effective immediately upon enactment, include reducing the favorable tax treatment currently afforded to:
• “Grantor retained annuity trusts” (“GRATs”);
• Sales by taxpayers of assets to “grantor trusts;” and
• Trusts to which a taxpayer has allocated his or her Federal GST Exemption.
If you are interested in taking advantage of the significant wealth transfer opportunities allowed to taxpayers under current law, you should seek the advice of an attorney and consider making gifts designed to utilize the current gift and GST exemption amounts, the creation of GRATs and the sale of assets to new or existing grantor trusts.
If you made gifts in 2012 and fully utilized the 2012 exemption amounts, please note that the 2013 exemption amounts are currently $5,250,000 as opposed to $5,120,000 and that an additional $130,000 in exemption is currently available to you this year to make further gifts.
Finally, as the laws in the Federal estate, gift and GST tax continue to fluctuate, you should have your existing Wills and/or Revocable Trusts reviewed to ensure that any trusts created under those documents are funded with the amounts you intended and are not under or over funded as a result of the numerous changes made to the Federal estate, gift and GST tax law since 2001. This review is critical to ensuring that your existing estate planning instruments are in accord with your personal and testamentary objectives.
