Although the American Taxpayer Relief Act (ATRA) finally resolved much of the uncertainty relating to federal gift and estate taxes, you’re not out of the woods quite yet.
Strategy: Plan ahead to avoid the generation-skipping tax (GST). This low-profile but potentially very expensive tax can hit wealth transfers that “skip” more than one generation.
Here’s the whole story: The federal gift and estate tax regime has undergone a long progression since the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA).
EGTRRA gradually increased estate tax exemption amounts and decreased tax rates leading up to a one-year repeal for 2010. Following EGTRRA, the estate tax was reinstated and temporary legislation allowed a $5 million exemption for 2011 and 2012 (with future indexing), while lowering the tax rate to 35%.
Under ATRA, the unified federal gift and estate tax exemption was permanently set at $5 million (indexed to...(register to read more)