Winter 2013 Newsletter

March 2013
Inside This Issue
Estate Taxes
Gift Taxes
Income Taxes
Winter 2013 NewsletterWith all of the talk about the “Fiscal Cliff,” and “Sequestration,” it makes one feel anxious and off-kilter. And with good reason: there is so much uncertainty out there that it is very difficult to plan for our financial futures with any degree of certainty. However, the government has stepped in and made what was very uncertain a little less so. This Newsletter will focus on some of the changes-and non-changes- in the tax laws as may apply to your family and you.

Estate Taxes

Many of you will recall all of the talk about the “Bush Tax Cuts.” You may remember all of the excitement back in 2010 when estate taxes were reduced to zero. For the following year, the taxes were set to revert to the estate tax levels of 2001: with a $1 million exclusion and a 55% maximum tax rate. But in 2010, a $5 million exclusion with a 35% maximum tax rate was enacted into law. That change was scheduled to expire on December 31, 2012. Never were the telephones busier in law offices and accounting practices than during the final weeks of 2012 with interested clients hungry for advice as to what to do.

Fortunately, the 2012 Tax Act was passed, signed by President Obama, and, at the every least, it sets forth permanent rules. Interestingly, it kept the Bush Tax Cuts in place for almost everyone.

For individuals who die on January 1, 2013 or thereafter, the legislation provides permanent guidance. It sets forth a permanent exclusion amount of $5,250,000 with a maximum estate tax rate of 40%, adjusted for inflation.

The 2012 changes made permanent the “portability” feature which allows an unused estate tax exemption for the first spouse to die to be used by the surviving spouse on her death. That is not automatic, however; be certain that as the surviving spouse you file the Form 706 timely, and elect to add your husband’s unused exemption to your future exemption.

Gift Taxes

The 2012 Tax Act raised the annual gift tax exclusion from $13,000 to $14,000 for 2013. Married couples may “split their gifts,” thusly gifting $28,000 to each donee, ordinarily, a child, without incurring any gift tax liability. (While this is a terrific tax exclusion it is not considered an exempted transfer for Medicaid purposes. Such a gift will trigger a transfer penalty when an applicant is seeking institutional Medicaid coverage.)

As with estate taxes, the gift tax lifetime exclusion is $5,250,000, with a maximum gift tax rate of 40%, adjusted for inflation.

Income Taxes

The 2012 Act permanently extended the existing income tax rates for all single taxpayers with taxable incomes below $400,000, and for married couples with taxable incomes below $450,000. Limitations on itemized deductions or personal exemptions may cause tax increases even on singles earning less than $400,000 or married couples earning less than $450,000, however.

Legislators addressed the issue of capital gains by raising the maximum tax rate when one sells equities or other capital assets from 15% to 20%, the higher rate being applied to those single taxpayers earning more than $400,000, or married couples earning more than $450,000. Taxpayers under those threshold amounts shall pay the 15%.

The above is just a brief list of the issues addressed by the 2012 Tax Act. It is a very good idea to schedule a meeting with your financial planner to review the rules that apply to you. For further information go to

The above list is for general information purposes only. It is not intended to constitute individual legal advice or a specific recommendation to any particular client./font>


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