2014 ESTATE AND GIFT TAX LAW UPDATE

2014 ESTATE AND GIFT UPDATE (posted 2/14/2014)

The laws changed since my last blog on this topic. The following are the major estate and gift tax laws and changes made in 2014:

1. The Estate, gift and GST tax (generation skipping tax) applicable exclusion amount increased from $5.25 million in 2013 to $5.34 million in 2014. This means that a married couple can now transfer a combined $10.68 million tax free and without federal estate, gift and GST tax.

2. The Estate, gift and GST tax is 40%.

3. The annual gift tax exclusion amount is $14,000 per donee.

4. Portability of the federal exclustion amount is now permanent which means the unused exclusion of the first deceased spouse can be used by the surviving spouse at death. However, GST and state exclusions are NOT portable.

5. The gift tax exclusion to a non-citizen spouse increased to $145,000. Gifts between spouses are unlimited if the donee spouse is a United States citizen, however, there are restrictions when the donee spouse is not a United States citizen.

ESTATE, GIFT AND GST TAX LAWS – 8/2011

By:  Nadine M. Catalfimo, Esq.        

On December 17, 2010, Congress enacted the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 which temporarily changed the estate, gift and generation skipping transfer tax laws.  The new laws are in effect only until December 31, 2012, and will “sunset” if new legislation is not passed by Congress by 2013.   The following are some important highlights of the changes in the tax laws:

Federal Estate Tax

A decedent dying in 2011 and 2012 receives a $5 million federal estate tax exemption ($10 million for married couples).  Estates that exceed the $5 million exemption will be subject to a 35% federal estate tax rate.

Portability 

Under the new laws, the $5 million exemption is portable between spouses.  Thus, if one spouse dies and does not utilize all of his or her exemption, the surviving spouse’s estate may elect to utilize the unused portion of his or her spouse.

Gift Taxes in 2011 and 2012 

The exemption was increased to $5 million for gifts made in 2011 and 2012.  In excess of the exemption, the tax rate of 35% applies.

Annual Gift Tax Exclusion Amount 

It remains at $13,000 per donee per year.

Generation Skipping Tax

In 2011 and 2012, the GST exemption is $5 million and the tax rate is 35%.

Step Up in Basis 

Under the new laws, heirs may inherit assets with a step up in basis equal to the fair market value of assets as of a decedent’s date of death.  This is important for capital gains tax upon the sale of an asset inherited by a beneficiary.

 What Happens in 2013?

Without new federal legislation enacted by December 31, 2012, GST tax will revert to a $1 million exemption and 55% tax rate.  Also, the gift tax exemption amount will revert to a $1 million exemption.  Further, the federal estate tax will revert back to a $1 million exemption and a top tax rate of 55%.

 Nadine Catalfimo, Esq. can be reached at ncatalfimo@MA-NHEstateLaw.com or (603) 952-4491 for more information.