The new year has rolled in, and the nation has dodged the fiscal cliff.
In a series of last-minute pow-wows, lawmakers finally came together and crafted a solution to avoid the impending fiscal cliff.
For estate planners out there, don't start looking for your plates to get full. The estate tax issues in the fiscal cliff have changed, but not as dramatically as many had hoped.
The estate tax will rise. That's one win for the Democrats, as the top rate will go up from 35 percent to 40 percent.
Let's move back and talk estate tax basics here. While most estates escape paying estate tax, those estates that are valued over the exemption amount pay estate tax on the amount that goes above the exemption.
If the fiscal cliff occurred, then the exemption amount would have been $1 million. But it was averted.
Now for the current, post-fiscal-cliff exemption amount: Only those amounts over $5 million will be taxed. And that amount will be indexed for inflation (which explains why the amount was at $5.12 million in 2012).
With the portability of the exemption also in the mix, the surviving spouse can take the deceased spouse's unused exemption. This isn't automatic, though, and an estate tax return still needs to be filed. But it does give the surviving spouse up to $10 million in exemptions.
The gift tax also stood to change in the fiscal cliff agreement. But pursuant to the fiscal cliff deal, the gift tax exemption amount stays at $5 million.
So for all of those wealthy individuals who didn't make the Dec. 31, 2012, cutoff for making large gifts, you can breathe easy. Your gift tax exemption isn't going anywhere.
At least not yet.