Why New Estate Tax Laws Can be a Benefit to You

If you are currently estate planning, then you may have heard about the new tax laws that are affecting people's lives and the future of their assets. The tax deal was put together in Washington and contained major points that had implications for estate planners all throughout the United States. Still, financial advisors are saying that the new tax laws are helpful, rather than hurtful, for estate planners. The tax laws are outlined in the American Taxpayer Relief Act of 2012. This is a permanent act that canceled out prior provisions in other acts. The permanency of the act should not be frustrating, but encouraging for taxpayers all over the United States. According to Financial Planning, the federal tax policy over the past decade has been relatively unstable. This new set of tax laws is going to be consistent, so that people will know exactly what their getting themselves into right from the outset.

One reason that estate tax laws are beneficial for taxpayers is because of the magnitude of the exemption amount that was decided upon. Prior to the American Taxpayer Relief Act of 2012, the federal estate tax exemption was set to return back to $1 million. This means that $1 million of a large estate could be exempt from estate taxes. This was the amount that was listed as an exemption back in 2003. Now, there will be a $5 million exemption amount in connection with the act. When indexed to inflation, the exemption amount for 2013 rests at $5.25 million this year. There is a 40% maximum rate for larger transfers as well.

Another reason that estate tax laws can help you is because the law maintains a unified gift and estate tax treatment. This means that the $5.25 million exemption can be used if you would like to bequeath assets at your death or create lifetime deaths. This will be especially beneficial to wealthier families who want to continue transferring finances to their children and grandchildren as time goes on. Another great benefit with the new estate tax laws is the portability that is built into the act. Under the new laws, after the death of one spouse, any unused portions of the deceased spouse's exemption can be used by the surviving spouse. This is a huge benefit to a spouse who may otherwise need to pay taxes on that exempt amount.

This means that a spouse who loses her husband can obtain his exempt $5.25 million and combine it with her own $5.25 in the future, making for a $10.5 million exemption. As well, Grantor retained annuity trusts (GRATs) keep their many benefits under the new tax laws. Many feared that the GRATs would be discontinued or lose their benefits when new laws went into place, but the American Taxpayers Relief Act of 2012 has no restrictions or limitations on the use of these trusts. This means that they can still be used as a way to deliver tax-free gifts to beneficiaries.

A final reason why estate tax laws that were passed recently can assist you in your estate planning is because Valuation Discounts still have no limitations or restrictions. These are discounts that concern transfers of business interests between family members. Still, the limitations have not been put in place so as of right now they are still unlimited. If you want more information about how estate tax laws affect your case, or if you need a professional on your side that can assist you as you work through your estate planning, then use this directory to locate an estate planning attorney near you today!