DID YOU KNOW? News You Need Now From Perkins Coie's Family Office Services Group

by Perkins Coie

Welcome to the Family Office Services Group's new update series "Did You Know?"  It is an easy-to-read, timely and brief focus on legal issues and developments facing you and Family Offices throughout the year.  

In our first edition of "Did You Know?" we look ahead to the end of the year and the many tax concerns that can arise as the calendar year closes.  For example, if you are considering making a donation to your alma mater, did you know that not all donations to educational institutions are considered gifts?  Read below to learn about other year-end issues you should review to keep your planning on track.  

Have a topic you would like to see us cover? We welcome your suggestions.  Please email your ideas to: MMcDaniel@perkinscoie.com

Federal Estate and Gift Tax Exemption – Increased in 2013

The current exclusion from the federal estate tax and the federal gift tax is $5,250,000, increased from $5,120,000 in 2012.  This increase, which results from an annual inflation adjustment, allows taxpayers to give additional amounts in 2013.  The current effective tax rate for transfers above this threshold is 40%. 

Annual Exclusion Gifts

In 2013, each person (donor) now has an annual exclusion from the application of the federal gift tax of $14,000 in value of assets per recipient (donee) per calendar year.  Note that this amount is indexed for inflation and is rounded to the nearest multiple of $1,000.  There is no limitation on the number of donees.  Annual exclusion gifts do not use the donor's federal estate and federal gift tax exemption.  The gifts must be completed by December 31 in order to qualify for the calendar year exclusion.   

Gifts, Tuition and Medical Expenses

Payments that are made by a donor directly to an educational institution are not considered "gifts" for gift tax purposes.  In addition, payments that are made directly to the provider of medical services, which includes health insurance premiums, are not considered "gifts" for gift tax purposes. 

Income Tax Basis of Transferred Assets

Gifts are favored under the income tax law - property received by way of gift or inheritance is not includible in the donee's income and generally has no adverse tax consequences.  However, a donor should be aware of the differences between the income tax basis treatment of assets that are given and the assets that are inherited at death.

When assets are given, the donor's income tax basis in the given property is transferred to the donee.  When assets are transferred at death, the income tax basis of inherited property is its estate tax value in the decedent's estate, which is usually its fair market value at the time of the decedent's death.  As a matter of overall strategy, donors commonly make lifetime gifts of cash or slightly appreciated property and either retain highly appreciated assets until death or use such assets to make charitable gifts. 

Washington State Estate Tax –  Changes in 2014

Beginning on January 1, 2014, the Washington state estate tax exclusion will be indexed for inflation.  Thus, the exclusion amount, currently $2 million, will increase over time, similar to the federal estate tax exclusion.

The Washington state estate tax rates will increase as well.  The highest marginal rate on assets in excess of $11 million increases from 19% to 20% as of January 1, 2014.  In addition, assets between $6 million and $8 million will be taxed at 18% (formerly 17%), assets between $8 million and $9 million will be taxed at 19% (formerly 18%), and assets between $9 million and $11 million will be taxed at 19.5% (formerly 18.5%).

The state of Washington does not impose a gift tax.  Thus, Washington residents may be able to avoid the Washington state estate tax by giving assets during their lifetimes.

A $2.5 million deduction is now allowable against the Washington state estate tax for a qualified, family-held business.  There are specific tests that must be met in order to qualify for the deduction. 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Perkins Coie | Attorney Advertising

Written by:

Perkins Coie

Perkins Coie on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.