North Central News

MONEY MATTERS: New estate tax rule is not bad

By Harvey Amwake, C.P.A.
Some individuals were in a panic late last year as the favorable estate and gift tax rules were set to expire in 2013. With Congressional action uncertain, no one knew how their plans might be affected.

To the relief of taxpayers and planners, most of the estate rules changed only slightly. The estate and gift tax exemptions will be $5,250,000 in 2013, up from $5,120,000 last year, and adjusted for inflation going forward. The top tax rate for estates and gifts exceeding these amounts will be 40 percent, up from 35 percent last year but better than the 55-percent rate that would have been the law had Congress not acted. And a surviving spouse will still be able to access the unused portion of the estate exemption of the deceased husband or wife.

It’s important to note that the exemption applies to both inheritances and lifetime gifts. The cumulative combined “transfer” exemption will be $5,250,000 whether the money is given away before or after you die. In addition, you can give away up to $14,000 annually to as many recipients as you like without tapping into your lifetime transfer tax exemption.

Average folks with estates far under $5 million might wonder how any of this applies to them. But the reality is that everyone needs an estate plan. The backbone of your estate plan, a will, is an essential legal tool intended to ensure that your final wishes are honored. A will also can indicate who will take care of your children should you pass away, and how the children can access their inheritance. If you want to include your favorite charity in your estate plans, there are strategies available to benefit both family and charity alike.

Estate planners might be breathing a sigh of relief, but don’t let the current rules lull you into complacency. Talk to your financial adviser, or contact us, and your attorney for a review of your estate plan today.

This article is for general information only and does not constitute financial advice. If you have any questions about financial matters, consult a professional tax adviser. Harvey Amwake, CPA, is a tax and small business consultant with the accounting firm of Harvey E. Amwake, PLLC., at 6232 N. 7th St., Suite 105. He can be reached at 602-753-0377 or by e-mail at Harvey@AmwakeCPA.com.

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