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Highlights of ATRA Benefits

Posted on in Estate Planning

The online publication Financial Planning recently reported on the benefits of the new American Taxpayer Relief Act of 2012 (ATRA), which have now gone into effect.

The first benefit highlighted by the report is the provisions for estate and gift tax. Unlike the prior law, which relied on sunset provisions with constant uncertainty surrounding federal tax policy, the new law's provisions are permanent.

Permanence of portability of the federal estate tax exemption for married couples is also offered under ATRA. This means that if the first spouse dies and the value of his or her estate does not require the use all of his or her federal exemption from estate taxes, then the amount of the exemption that was not used for the deceased spouse's estate may be transferred to the surviving spouse's exemption so that he or she can use the deceased spouse's unused exemption plus his or her own exemption when the surviving spouse later dies.

The new law maintains unified gift and estate tax treatment, meaning that the exemption may be used for lifetime gifts or bequests at death. On January 11, 2013, the IRS announced that adjusted for inflation, the applicable exemption amount for 2013 is $5,250,000. Without the new law, the federal estate tax exemption was scheduled to return to its 2003 level of $1 million. The $5 million exemption amount is in place for the foreseeable future.

The new law contains no restrictions or limitations on the use of grantor retained annuity trusts (GRATS) and also placed no restrictions or limitations on the applicability of valuation discounts to intra-family transfers of business interests.

With all the new laws, it's important to consult with a qualified estate planning attorney to make sure that you and your family are receiving the best benefit of these laws.

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