Federal Estate Tax, Gift Tax and Generation Skipping Transfer Tax Changes

Federal Estate Tax, Gift Tax and Generation Skipping Transfer Tax Changes:  These three taxes form what is sometimes referred to as the “federal transfer tax system.”  

  • The top tax rate was INCREASED from 35% to 40%
  • All other aspects of the transfer tax system put in effect in December of 2010 by the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 have been extended and made “permanent.”  [The mentioned legislation picked up the slack created by “sundowning” created by the Economic Growth and Tax Relief Reconciliation Act of 2001.  This legislation was supposed to have led to the permanent repeal of the Federal Estate Tax and the Federal Generation Skipping Transfer Tax but the repeal was only for the year 2010 and Congress did nothing to extend this until enactment of the 2010 legislation cited above.] So, the $5,120,000 exemption for all three taxes, indexed for inflation, remains in effect as the three taxes remain “unified.”  “Portability” of the estate tax exemption (but not the Generation Skipping Transfer Tax exemption) for use by a surviving spouse, where it has not been used by the first decednt spouse, also has been made permanent.
  • In addition (and this is NOT part of the 2012 Act), the Annual Gift Tax Exclusion for 2013 has been increased to $14,000 from $13,000.
  • The “inflation adjusted” exemption for 2013