California Estate Planning Blog by Kevin Staker

January 1, 2013

Senate Passes the Change to the Estate Tax, 89-8; Exemption for 2013 To Be Over $5.2 Million and Rate To Be 40 Percent

It is official. The Senate passed the “American Taxpayer Relief Act of 2012″ on a vote of 89-8 early on January 1, 2013.  We will now have an estate tax rate of 40 percent.   The estate tax and related exemptions will now be $5,000,000 adjusted for inflation from 2010.  That number was $5,120,000 for 2012.  The news media erroneously reports the exemption at $5,000,000 now.   The Senate bill technically (and simply) makes permanent the changes made to the estate tax by the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010.

I must admit I am still trying to find out what the inflation adjusted number for 2013 will be.  The IRS it appears has not come out with an official number.  IRS Revenue Procedure 2012-41 announced the inflation adjustments for 2013 but specifically fails to state the number for the estate tax exemption.

See http://www.irs.gov/pub/irs-drop/RP-12-41.pdf

My guess is the estate, gift, and generation-skipping transfer tax exemptions will be increased to $5,270,000.  The number is the $5,120,000 exemptions of 2012 adjusted for 3 percent inflation in 2011 ($5,273,600) rounded down the the nearest $10,000.  It is a wild guess on my part as to the inflation number to be used.  United States inflation was an even 3.0 percent for 2011, and I assume they use the figure for the year two years before the year to be adjusted because you do not know the figure for the prior year until you are already in the year to be adjusted.

The bill is technically House Resolution number 8, a bill passed by the House that the Senate technically gutted and substituted in the language of the their tax act. They had to do it this way because revenue acts technically have to start in the House.

The full text of the bill can be found at http://www.businessinsider.com/breaking-full-text-of-the-157-page-bill-to-avert-the-fiscal-cliff-2013-1 or at http://i2.cdn.turner.com/cnn/2013/images/01/01/american.taxpayer.relief.act.pdf

The bill now goes to the House of Representatives for approval. The Tea Party folk will not be happy. This bill has all sorts of tax pork in it. They especially will not like the increase in income tax rates for higher income folk. However, this is the best they are going to get. And they will have another chance to rein in federal government spending next in the fight over increasing the federal debt limit.

We shall see,

Kevin Staker
Estate Tax News Blog

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6 Comments »

  1. Thank you Mr. Staker for your insight and knowledge. As an individual involved in an Iowa family farming business I have read all of your posts with great interest. You have been my primary source of information in regard to estate tax changes in 2010, as you were this time around. I was very pleased when you resumed your blog. Thanks again for all your efforts and wisdom. I wish you a very Happy New Year!

    Bill Myers

    Comment by William G. Myers — January 1, 2013 @ 9:40 am | Reply

  2. Mr. Staker, now that the House has also passed it (and Obama will presumably sign it), do you think the threat to perpetual dynasty trusts and IDGT’s is gone? In terms of Obama’s proposals to place restrictions on GRAT’s, IDGT’s, and dynasty trusts, I would have thought that those things would have been addressed in the estate tax compromise (and not as its own standalone bill). Since the estate tax issue has now been permanently addressed, is it unlikely for those proposed restrictions to reappear?

    Comment by Ben — January 1, 2013 @ 8:57 pm | Reply

    • I believe President Obama and his folk will not bring up these attempted changes again. They are exhausted by all the toing and froing. Also, they have bigger fish to fry in fending off the next attempts by the Republicans to cut government spending.

      Comment by kevinstaker — January 2, 2013 @ 11:53 am | Reply

  3. [...] no. 545), “the Senate technically gutted and substituted in the language of the their tax act,” explains Kevin Staker, an estate planning attorney. “They had to do it this way because revenue acts [...]

    Pingback by More Estate Tax Changes Could Follow Fiscal Cliff Deal - Forbes — January 5, 2013 @ 9:23 pm | Reply

  4. [...] no. 545), “the Senate technically gutted and substituted in the language of the their tax act,” explains Kevin Staker, an estate planning attorney. “They had to do it this way because revenue acts [...]

    Pingback by More Estate Tax Changes Could Follow Fiscal Cliff Deal | Xtax — January 6, 2013 @ 10:06 am | Reply

  5. [...] 545), “the Senate technically gutted and substituted in the language of the their tax act,” explains Kevin Staker, an estate planning attorney. “They had to do it this way because revenue acts [...]

    Pingback by More Estate Tax Changes Could Follow Fiscal Cliff Deal - Rothman and Tobin — January 7, 2013 @ 2:49 pm | Reply


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