Transfer Tax Certainty is Finally Here! What Now?

Estate Planning Magazine

In the article, "Transfer Tax Certainty Is Finally Here! What Now?" Beth S. Kaufman discusses the American Taxpayer Relief Act (ATRA). For the complete article, please click on the PDF above.

Excerpt taken from the article.

For the first time in more than a decade, we have an estate and gift tax law without an expiration date. Since 2001, we have had only temporary provisions of the Code dealing with the estate, gift, and generation-skipping transfer (GST) tax exemptions, the applicable rates, and certain taxpayer-friendly GST provisions, among other things. The previous expiration date, 12/31/2010, brought a last-minute two-year extension. Portability of the exemption amount was added for 2011 and 2012, but, again, with an expiration date.

At the end of 2012, we faced reversion to 2001 law once again. This time the legislation was more than last minute. The American Taxpayer Relief Act (ATRA) passed the Senate early on the morning of 1/1/2013. The House accepted the Senate provisions late on the same day and ATRA was signed by the President on 1/2/2013.

The new bill gave us a permanent, indexed, unified exemption from gift and estate tax at $5 million, along with a same-sized exemption from GST. A new maximum tax rate of 40% was enacted. The state death tax credit is permanently gone, and the GST relief provisions and portability are permanently in the Code. All concerns about the potential clawback of gift tax exemption used in 2011 and 2012 are moot.

So now what? While ATRA resolved the immediate issue of expiring tax provisions, it did not address other economic and budgetary issues. Our country still faces problems with an unbalanced budget, sequestration, and an escalating national debt. There are continued calls for broad based tax reform. There could be more tax legislation on the way. In short, permanent means only until Congress acts again.

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