Congress has now reached a deal to avert the "fiscal cliff" and that deal includes new rules on the Federal Estate Tax. These new rules aren't getting as much coverage as the income tax rules because they effect so many fewer people but they have been a concern for many clients so I wanted to try provide a simple summary.
Under the new deal a federal estate tax of 40% is taxed on all individual estates that exceed $5 million dollars (The prior numbers were 35% on estates over $5.2 million. Couples can, with proper planning protect each of their personal exemptions and pass $10 million dollars tax free. Decedents can also leave an unlimited amount to their spouse as long as that spouse is a United States Citizen. Note: The federal government currently does not recognized legal same sex spouses for this benefit and that issue is currently before the US Supreme Court.
This Federal Estate Tax Exemption is reduced by any reportable gifts during the decedent's life. A reportable gift is a gift made to someone other than your spouse that exceed $14,000 (Yes, that is a new number) other than direct payment of education and medical expenses. Indefinite loans can count as gifts as can transfers to irrevocable trusts and below market value sales.
The Washington State Estate tax is unchanged and contains a $2 million per person exemption ($4 million for a couple with proper planning.) Washington State Estate tax is graduated and less and includes offsets for any federal taxes paid. Washington State does recognize legal same sex marriages and gives those spouse an unlimited exemption. It also contains special offsets for operating farms.
Want to develop an estate plan that best addresses your tax issues and other priorities, contact us for a free 1/2 hour consultation. Prior clients with questions about how this new law might impact their plans are always welcome to call for a free consultation as well. We can be reached (206) 459-1908 or email us at [email protected].
Under the new deal a federal estate tax of 40% is taxed on all individual estates that exceed $5 million dollars (The prior numbers were 35% on estates over $5.2 million. Couples can, with proper planning protect each of their personal exemptions and pass $10 million dollars tax free. Decedents can also leave an unlimited amount to their spouse as long as that spouse is a United States Citizen. Note: The federal government currently does not recognized legal same sex spouses for this benefit and that issue is currently before the US Supreme Court.
This Federal Estate Tax Exemption is reduced by any reportable gifts during the decedent's life. A reportable gift is a gift made to someone other than your spouse that exceed $14,000 (Yes, that is a new number) other than direct payment of education and medical expenses. Indefinite loans can count as gifts as can transfers to irrevocable trusts and below market value sales.
The Washington State Estate tax is unchanged and contains a $2 million per person exemption ($4 million for a couple with proper planning.) Washington State Estate tax is graduated and less and includes offsets for any federal taxes paid. Washington State does recognize legal same sex marriages and gives those spouse an unlimited exemption. It also contains special offsets for operating farms.
Want to develop an estate plan that best addresses your tax issues and other priorities, contact us for a free 1/2 hour consultation. Prior clients with questions about how this new law might impact their plans are always welcome to call for a free consultation as well. We can be reached (206) 459-1908 or email us at [email protected].
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