the BERINGER group Newsletter

Barry Levin


Wealth Transfer Taxes After 2012: Good News

by Barry Levin


Although the American Taxpayer Relief Act of 2012 will have the impact of raising Federal income tax rates on some Americans, it does contain some good news with respect to "transfer taxes," i.e. Federal estate, gift and generation skipping taxes.


Let's review what was.  In 2012 the "exemption" from the Federal transfer taxes was $5,120,000 per taxpayer and the maximum tax rate was 35%.  This meant, for instance, that a husband and wife who had not previously made taxable gifts could gift assets worth $10,240,000 to a generation, skipping tax exempt trust for the benefit of their children and more remote descendants without paying a gift tax. Furthermore, those assets and the growth thereof were sheltered from future estate taxes in the estates of their children and more remote descendants. BUT, those exemptions were scheduled to revert in 2013 to $1,000,000 per taxpayer and the rate scheduled to rise to 55%.

While many practitioners felt Congress would not let the exemptions and rates revert, no one was sure what the political process would bring. As a result, prudent advisors were urging their clients who could afford it and were so inclined to make substantial gifts to take advantage of these high exemptions, since the exemptions could potentially "go away."

If you did this, good for you.  If you didn't, we are all relieved that in their "wisdom" Congress and the President made much of the 2012 law permanent.  So, let's see where we stand in 2013 and going forward with respect to federal transfer taxes.


  • The exemptions for estate, gift and generation skipping transfer taxes for 2013 (as adjusted for inflation) will be $5,250,000 per taxpayer.
  • Estate and gift taxes are "unified", meaning that one can gift during a lifetime the same amount as one could die with in one's taxable estate. Previously the gift exemption was lower than the estate tax exemption.
  • The maximum gift or estate tax rate is 40%.
  • The Generation Skipping Tax exemption and maximum rate is the same as the ones for estate and gift taxes.
  • The Gift Tax Annual Exclusion for qualifying gifts in 2013 is $14,000 (as adjusted for inflation).
  • The concept of "portability" of unused estate tax exemption from a deceased spouse to the surviving spouse is a permanent part of the law. This means, for example, that if a husband who has a remaining exemption of $5,000,000 dies and leaves all his assets to his spouse (instead of, as was previously the case, putting his remaining exemption in a separate trust that would "capture" that exemption and not allow it to go unused), the spouse would be able to use both the deceased husband's and her own exemptions in her estate. Note that this "portability" feature does not apply to the GST exemption; so one who desires to fully use his/her GST exemption will still need to careful planning to create the appropriate structures for its use.

So here is the "take away." If you acted in 2012, you have a platform for future planning in 2013 and beyond, and the growth on what you may have given away will no longer be in your estate[s]. If you didn't act in 2013, your window of opportunity is still open.  Look out and consider what you may want to do.

In any event, it would be good to meet with your advisors to make sure that you are aware of the opportunities you have and what you may need to do to take advantage of them.






Copyright 2013.  The BERINGER Group