By David Spence
On January 1, 2013 the generous estate and gift tax provisions in the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (“2010 Tax Relief Act” or “the Act”) are set to expire. The Act lowered estate, gift, and GST taxes for 2012 by increasing the exemption amount from $1,000,000 to $5,120,000 and by reducing the top tax rate from 55% to 35%. The $5,120,000 exemption is per estate or per lifetime donor—not per recipient. However, due to the new portability provision, up to $10,240,000 in total estate tax exemption is now available for a married couple.
If Congress does not act to renew the provisions, the tax rates and exemptions for estate tax, gift tax, and generation-skipping transfer (“GST”) tax will revert to the pre-2001 levels. This would represent a decrease in the current exemption level from $5,120,000 to $1,000,000 and an increase in the tax rate from 35% to 55%.