White & Case
Project Finance

Effects of the New US Tax Law on Estate Planning

January 2013
Michael E. Kavoukjian, John M. Olivieri, Winthrop Rutherfurd Jr., Cecily P. Maguire


On January 3, 2013, President Obama signed the American Taxpayer Relief Act of 2012 into law. As a result, for the first time in over 12 years, there is now some certainty in the Federal estate tax, the Federal gift tax and the Federal generation-skipping transfer (or "GST") tax. Under the new law, in general:

  • The exemption from the Federal gift tax is US$5.25 million in 2013. This amount will rise with inflation in future years.
  • The exemptions from the Federal estate tax and the GST tax are US$5.25 million each in 2013. These exemptions will also rise with inflation in future years.
  • The tax on amounts transferred in excess of these exemptions is now 40 percent.
  • The estate and gift tax exemptions are "unified". This means that the amount of the estate tax exemption available at death will be reduced by the amount of the gift tax exemption used for lifetime gifts.
  • The estate tax exemption is "portable" between spouses. This means that if one spouse dies with an estate valued at less than his or her available estate tax exemption, the "unused" portion of his or her exemption may be used by the surviving spouse to exempt certain gifts made during life or bequests made at death.
  • In addition to the gift tax "exemption," there remains a gift tax "annual exclusion." This is the amount that any one donor can give away every year to an unlimited number of donees without triggering a gift tax and without reducing the amount of the gift tax exemption. The annual exclusion amount is US$14,000 for 2013. It too will rise with inflation in future years.
  • These exemptions, rates and portability provisions have no scheduled expiration and are not slated to change (except for the inflation adjustments mentioned above). Of course, a future Congress can always change the law.

This Client Alert is provided for your convenience and does not constitute legal advice. It is prepared for the general information of our clients and other interested persons. This Alert should not be acted upon in any specific situation without appropriate legal advice, and it may include links to websites other than the White & Case website. White & Case LLP has no responsibility for any websites other than its own, and does not endorse the information, content, presentation or accuracy, or make any warranty, express or implied, regarding any other website.

This Client Alert is protected by copyright. Material appearing herein may be reproduced or translated with appropriate credit.

© 2013 White & Case LLP