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Federal Estate Tax Exemption — “Permanent” and Portable

D Kelly-Dohse 2014
Denise Kelly-Dohse, CFP®
Vice President, Wealth Advisor
[email protected]
(585) 419-0670 x50619

When estate taxes hit, they can hit hard. So taxpayers can take a lot of comfort in the fact that the American Taxpayer Relief Act (ATRA) dated January 3, 2013 has set the federal estate tax exemption at $5.25 million for 2013, indexed for inflation.

Permanent “Temporary” Fix

ATRA ends years of speculation about whether lawmakers would allow the estate tax exemption to fall to $1 million in 2013, as prior law had called for. While it is always possible the law could change again, at least for now the $5.25 million (inflation-indexed) exemption is “temporarily” permanent.

Gift Taxes, Too

The lifetime gift tax exclusion of $5.25 million may be used for planning purposes during one’s lifetime. It represents the cumulative amount that can be excluded from gift taxes.


A married couple who both make full use of their combined estate tax and gift tax exemptions could choose to transfer $10.5 million to their children (or other heirs) tax free. A husband may elect to leave everything to his wife (surviving spouse). In this situation, the wife’s estate tax exemption went unused and the transfer did not take full advantage of their exemptions. (There is generally no estate-tax liability on transfers to a surviving spouse due to an unlimited marital deduction.)

ATRA held good news for married couples. An estate’s executor or personal representative may elect to make the decedent’s unused estate tax exemption available for use by the decedent’s surviving spouse (in addition to the surviving spouse’s own exemption). This portability rule was set to expire at the end of 2012 but is now “permanent”.

Tax information presented is not to be considered as tax advice and cannot be used for the purpose of avoiding tax penalties. Canandaigua National Bank & Trust does not provide tax, legal, or accounting advice. Please consult your personal tax advisor, attorney, or accountant for advice on these matters. 

This material is provided for general information purposes only. Past performance is not indicative of future investment results. Any investment involves potential risk, including potential loss of capital. Before making any investment decision, please consult your legal, tax and financial advisors. Non-deposit investment products are not bank deposits and are not insured or guaranteed by Canandaigua National Bank & Trust or its affiliates, or any federal or state government or agency and are subject to investment risks, including possible loss of principal amount invested.