As part of the tax compromise Congress approved to avoid tumbling down the “fiscal cliff,” the amount that is exe...Read more
'Fiscal Cliff' Deal Brings Changes to Estate Taxes and IRAs
- January 26th, 2015
Congress finally came to an agreement to avoid the "fiscal cliff," and the agreement includes some changes to federal estate taxes and Individual Retirement Accounts (IRAs). The American Taxpayer Relief Act sets a permanent estate tax rate and provides a tax break for cash donated to charities from an IRA.
The new law makes only minor changes to the federal estate tax. The amount that you can transfer tax-free either during life or at death will remain the same as it has the past two years. The law permanently sets the estate tax exemption at $5 million for an individual (now $5.43 million due to inflation) and $10 million for a couple (now $10.86 million). The lifetime gift tax exclusion – the amount you can give away without incurring a tax – also remains the same at $5.43 million. But you can still give any number of other people $14,000 each per year without the gifts counting against the lifetime limit.
Local Elder Law Attorneys in Ashburn, VA
Hale Ball Carlson Baumgartner Murphy PLC
Attorney Samantha Simmons Fredieu is an associate at Hale Ball. Ms. Fredieu graduated magna cum laude from Vermont Law School where she was the symposium editor on the Vermont Law Review, a production editor on the Vermont Journal of Environmental Law, and a member of the Moot Court Advisory Board. She has clerked for...
Ron M. Landsman, P.A.
Ron M. Landsman has been practicing elder law since 1983, before it was known as elder law, originally with Landsman and Laster, Washington, D.C., then Landsman, Eakes and Laster, also in Arlington, VA, and since 1990 in his own practice in Montgomery County, Maryland. He has been among the most active members of the...
Felinton Elder Law & Estate Planning Centers
Mindy Felinton concentrates in the areas of Medicaid planning, Veterans' Benefits, asset protection, nursing home planning, elder law, wills, estate planning, trusts, living wills, powers of attorney, probate administration and trust administration and began her legal career 30 years ago as an Assistant State Attorney...
Under the new law, the gift and estate tax rate will increase from 35 percent to 40 percent. This means that if you transfer more than $5.43 million either during your life or upon your death, your estate will be taxed at 40 percent. The new law also makes permanent the "portability" provision currently in place. This allows a surviving spouse to add the unused portion of a deceased spouse's exclusion to his or her own. Note that portability is not automatic -- the estate must file an estate tax form when the first spouse dies even if no tax is owed.
The new estate tax rates and rules are “permanent,” but only until Congress decides to revisit them and the President agrees to the changes. But keep in mind that the new law does not address state estate taxes, which many states have.
The fiscal cliff deal also brings back a tax provision called the IRA charitable rollover that had expired in 2011. The law extends the provision through 2013. This allows investors aged 70 ½ or older to transfer as much as $100,000 a year from an IRA directly to a charity without counting it as taxable income. Non-Roth IRA owners are required to take yearly minimum distributions from their IRAs starting at age 70 ½, and the charitable donation can count toward the taxpayer's minimum required distribution for the year.
Last Modified: 01/26/2015