April 23, 2014

'Permanent' Transfer Tax Relief At Last

For the first time in more than a decade, Congress has enacted a permanent set of estate, gift and generation-skipping transfer tax rules. While Congress can always change the law, there is no automatic "sunset" or change built into the current law. 

In a nutshell, the new transfer tax law provides: 

  • $5 million exemption for gift, estate and generation-skipping tax, adjusted for inflation after 2011. The 2013 exemption amount is $5,250,000.
  • Exemption is applied both to lifetime gifts and to transfers at death, and also applies for generation-skipping transfers.
  • Marginal tax rate on transfers above the exemption amount is 40%.
  • Portability is made permanent. This allows a surviving spouse to use the “unused” gift and estate tax exemption (but not generation-skipping tax exemption) of the first spouse to die for the survivor’s lifetime gifts and transfers at death, with certain restrictions.
  • Several helpful generation-skipping tax technical provisions were made permanent.

Other items to consider:

  • The gift tax annual exclusion for 2013 is $14,000, up from $13,000, and is increased to $143,000 for gifts to a non-U.S. citizen spouse.
  • Direct payment of tuition and medical expenses remains gift-tax free in unlimited amounts.
  • The new, higher income tax rates also apply to trusts, which will focus increased attention on income tax planning for trusts.
Copyright © 2014, Sheppard Mullin Richter & Hampton LLP.

About the Author


Lauren Liebes is an associate in the Tax and Estate Planning Practice Group in the firm's Los Angeles office.

Ms. Liebes specializes in all aspects of family wealth planning. She also advises fiduciaries regarding the administration of trusts and probate cases.

Ms. Liebes also counsels public charities and private foundations in connection with their formation and the tax and other legal issues arising in connection with their operation and management.


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