Estate Tax Law Made Permanent with Passage of American Taxpayer Relief Act

The Senate and House voted over New Year’s to pass the American Taxpayer Relief Act of 2012 (H.R. 8) ending (at least for now) the uncertainty of the future of the federal estate and gift tax law. The Act permanently extends a number of tax provisions, modifies the estate tax, and revises tax rates on ordinary and capital gain income, among other things.

The Act permanently maintains the estate and gift tax exclusion at $5 million (indexed for inflation), but also permanently increases the flat rate in 2012 estate, gift and generation-skipping transfer (GST) tax rates from 35% to 40%. In addition to this, the estate tax “portability” election, where the surviving spouse’s exemption amount may be increased by the deceased spouse’s unused exemption amount, was made permanent by the Act.

Perhaps the greatest benefit of the estate tax provisions of this legislation is the removal of the continuing uncertainty caused by the threat of the “sunset” of the favorable estate tax regime. For most people, the trade off of permanently increased exemptions is well worth the increased tax rates. Many people choosing not to take action because of the uncertainty should now consider updating their planning to best utilize the current law.

Gregory S. Williams is an estate planning attorney with Carruthers and Roth, P.A. He can be reached at 336.478.1183 or

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