Deciphering the 2013 Estate and Transfer Tax Law

Now that the dust has settled from the fiscal cliff aversion, a lot of advisors and their clients are confused about the effects of the last-minute tax law on estate planning. Despite all the confusion, not much has changed from 2012 to 2013. The only thing lawmakers changed was raising the estate tax rate from a maximum of 35% to 40%.

There was no change made to valuation discounts so Grantor Retained Annuity Trusts and other high net worth planning techniques are intact. Since income tax rates were raised for the wealthy, Charitable Trusts may be more attractive than in 2012. Because the debt ceiling, the spending sequester and other budgetary concerns are sure to put pressure on Congress to find additional revenue, clients should take advantage of current laws before they change. Specifically high net worth clients should continue to make gifts to Dynasty Trusts to use their $5mm exemption(s) before the next Washington fiscal crisis can come along and take them away.

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