Fiscal Cliff Deal Comes with Estate Tax Changes

Fiscal Cliff Deal Comes With Estate Tax Changes - Boomfish Wealth GroupThe fiscal cliff deal, passed at the 11th hour, comes with a great deal of changes, though we’re still waiting for spending cuts and debt ceiling talks. Fortunately for many, the fiscal cliff deal will maintain many of the estate tax rules of 2012, according to Forbes.

The deal, made under the wire, prevented several automatic estate tax changes that would have taken place otherwise. Without any action, the fiscal cliff would have dropped the estate tax exemption from $5 million to $1 million per person, and the maximum estate tax rate would have jumped from 35% to 55%. These changes would have exposed many Americans to more taxes.

The new deal makes permanent the $5.12 million estate tax exemption available per person. This number will be adjusted for inflation. The deal also still allows spouses to inherit from each other without paying taxes (until the second spouse dies) and use any unused exemption of the deceased spouse.

Unrelated to the fiscal cliff deal, the IRS also increased the amount of money able to be gifted tax-free each year from $13,000 to $14,000. These yearly gifts don’t contribute to the $5.12 million lifetime exemption mentioned above, so you can give without depleting the amount you can transfer in your estate.

This is great estate planning news, but the bigger question is what does it mean to you and your situation – your future, your family, and to the causes the matter to you deeply.


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