Federal Gift Tax Rules for 2013 - Two Tips for South Dakota Estate Planners

By passing the American Taxpayer Relief Act of 2012 (“ATRA”), President Obama and Congress agreed on a first step towards providing some clarity to estate planning attorneys and their clients.  Here are two tips for South Dakotans interested in the federal gift tax.

Tip # 1 - 40% Maximum Rate and $5.25 Million Lifetime Exemption

The gift tax is charged on any transfer made during the donor’s lifetime that exceeds the donor’s available lifetime exemption.

The gift tax is now permanently unified with the estate tax, so it uses the same rates and schedules as the estate tax, including the 40% maximum tax rate and lifetime exemption amounts.

Tip # 2 - Annual Exclusion Increases to $14,000

The annual gift tax exclusion is the amount a donor can give to any other individual each year without gift tax consequences.

Gifts exceeding the annual exclusion must be reported to the IRS, and this excess is deducted from the donor’s lifetime exemption.  If none remains, the donor will owe gift tax on the excess.  In 2013, the annual exclusion is $14,000.00.