The document summarizes key changes to estate planning under the American Taxpayer Relief Act of 2012, including an increased estate tax rate of 40% and applicable exclusion amount of $5,250,000. It warns that while fewer estates will face federal taxes, state estate taxes may still apply without planning. Portability allows spouses to maximize exclusions without trusts but has limitations. Income and capital gains tax planning is also important for trusts given higher tax rates. Charitable remainder trusts can help mitigate these taxes.

1. More to Gain, More
to Lose
{ An Estate Planning Update: How the American Taxpayer
Relief Act of 2012 Can Change Your Estate Plan
Peter V. Arcese, JD, MA, LL.M (Tax)
Estate Planning & Mediation
11 Broadway, Suite 615, New York, NY 10004
(646) 261-1200, peter@pvacounsel.com

2.  Maximum Estate & Gift Tax Rate increased to:
40%.
 Estate Tax Applicable Exclusion for 2013:
$5,250,000.
 Reunification of Estate and Gift Tax rates and
applicable exclusion amount.
 “Portability” of the deceased spouse unused
exclusion (DSUE) remains available.
Be aware that …

3.  Fewer estates than ever will be subject to
Federal Estate Tax.
 State Estate Taxes may still be imposed & affect
planning.
 E.g. in New York State, a $5,250,000 estate
which is free of Federal estate tax, would incur
a state tax of: $420,800 without proper
planning.
Beware …

4.  Portability allows for spouses to potentially
maximize use of their applicable exclusion
without the use of trusts.
Be aware that …

5.  Portability depends on an Executor being
appointed, filing a federal estate tax return, and
making an election.
 The amount of unused exclusion depends on
the amount remaining from the “last deceased
spouse.”
 Portability will not protect assets from tax on
appreciation during the survivor’s lifetime.
 Portability will not provide the asset protection
and management advantages of a trust.
Beware …

6.  Estates & trusts reach the highest Income Tax
Marginal rate with income of $11,950.
 The rate on ordinary income is: 39.6%.
 The rate on capital gains is: 20%.
Be aware …

7.  Income tax planning is now a key element for
reducing the tax consequence associated with
the benefits of estate planning with trusts.
 Estates & trusts may also be subject to the new
3.8% “Medicare” surtax, resulting in a marginal
rate of 43.4%
Beware …

8.  Charitable Remainder Trusts can help reduce,
defer, or eliminate capital gains &/or the 3.8%
surtax.
 Direct contributions from an IRA to a charity
by donor’s over 70 ½ years of age are still
available for 2013.
Be aware …

9.  peter@pvacounsel.com
Questions?