Estate Tax Legislation

The American Taxpayer Relief Act of 2012

The bipartisan tax compromise package that passed at the end of 2012 included some estate tax relief provisions for our nation's family businesses.

The American Taxpayer Relief Act of 2012

This legislation provides family-owned businesses with some relief from the estate tax and moves us one step closer to the Family Business Estate Tax Coalition’s goal of fully repealing this onerous tax.

Key provisions of current law include:

• A maximum estate tax rate is 40 percent, effective January 1, 2013. While this is an increase 2012's 35 percent, it is sharply lower than the 55 percent rate that could have taken effect absent the legislation.  
• The law permanently maintains the $5 million exemption amount, indexed to inflation. As of the end of 2012, the inflation adjusted amount is $5.12 million.
• Unification:  The estate and gift taxes are permanently unified. This establishes a single graduated rate schedule for both the estate and gift taxes, simplifying estate planning.  
• Spousal portability:  The law permanently allows couples to transfer any unused exemption to the surviving spouse under simplified rules.    
• No harmful offsets—preserves valuation discounts, grantor-retained annuity trusts (GRATs) and state estate tax deductibility. 

The Impact on Family Business