Pozzuolo Rodden, P.C., Philadelphia Estate Planning Attorneys, Released the Article: "The Federal Estate Tax Provisions of The American Taxpayer Relief Act of 2012"

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This article discusses the New 2013 vs. the 2013 Estate Tax Default Rules.

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The Law Firm of Pozzuolo Rodden P.C., announces the release of the article "The Federal Estate Tax Provisions of The American Taxpayer Relief Act of 2012 ". Below is a sample of the first couple of paragraphs. If you would like to read more, please read the full article and other corporate law, or estate planning topics at http://www.pozzuolo.com/Pubs_Newsletters.shtml
The Federal Estate Tax Provisions of The American Taxpayer Relief Act of 2012

In the wee hours of the morning while most winding down their new year’s celebrations, the Senate was tying up loose ends of all impending fiscal cliff. Through the process, they have finally solved the riddle of the Federal estate taxes for 2013 and on with the American Taxpayer Relief Act of 2012. Essentially, the recent bill extends the 2012 scheme indefinitely with the exception of a 40% maximum marginal tax rate instead of a 35% maximum marginal tax rate as provided in 2010 through 2012. This averts the default 2013 rules where the exemptions drop from $5.25 million to $1 million and the maximum marginal tax rate of 55%.

The New 2013 vs. The Default 2013:

The highlights of the 2013 rules compared to the default 2013 rules in absence of the recent legislation are an exclusion of $5.25 million indexed for inflation as opposed to $1 million under the default rules, a marital portability of the exclusions, and a maximum estate tax rate of 40% as opposed to 55%.

First, the $5.25 million exemption amount allows a person to transfer such amount tax free during life or at death. Using a tax rate of 50%, this would save greater than $2 million in wealth transfer taxes compared to the $1 million exemption amount. Further this will increase in subsequent years as it is indexed to grow with inflation. Second, the new 2013 law maintains spousal portability of this exemption amount. Spousal portability allows a surviving spouse to use any unused exemption of a predeceased spouse if the predeceasing spouse's executor makes the proper election on the federal estate tax return. This is important if one spouse owns the majority of the assets and the less wealthy spouse dies first. The less wealthy spouse does not have the assets to use the exemption and thus the exemption would be lost forever. Under portability the surviving spouse may now use the unused exemption to receive a total exemption of $10,240,000. Finally, while the default maximum tax rate was to be 55%, the new maximum tax rate is 40%. This saves $150,000 in tax per million.


Compared to the rumored alternatives of the default tax rule, a lower exemption amount, or something completely new, the recent 2013 legislation was a late blessing. This rule provides the favorable tax rules of 2011 and 2012 with the only negative of a 40% tax rate instead of 35%. Additionally, there has been much uncertainty in the estate planning field since 2009 as practitioners were first anticipating the 2010 rules and more recently the 2013 rules. This provides the stability that people do not have to feel uneasy about their estate plans for whether they will be up to date with a complex set of rules that change or sunset after a number of years.

If you have any questions or concerns about the estate tax provisions of the new “Fiscal Cliff Tax Act”, please contact Joseph R. Pozzuolo, Jeffrey S. Pozzuolo or Stephen P. Taylor.

Other corporate tax and estate planning publications and articles are available at: http://www.pozzuolo.com/Pubs_Articles.shtml

Pozzuolo Rodden, P.C. provides specialized cost-effective legal services to privately held business owners and high-net-worth clients in Pennsylvania and New Jersey in excess of 35 years.

Practice Areas:

Business planning and transaction, complex business litigation, commercial real estate and development, construction law and litigation, advanced estate planning and administration, tax and pension law, high profile and intricate family litigation, and employment law and litigation.

Pozzuolo Rodden, P.C.
Counselors at Law
2033 Walnut Street
Philadelphia, PA 19103

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Joseph R. Pozzuolo, J.D., B.B.A.
Pozzulo Rodden, PC
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