Estate Planning After the American Taxpayer Relief Act

by Poyner Spruill LLP

Congress adopted the American Taxpayer Relief Act (the Act), effective January 1, 2013. The Act made permanent tax rates and exemptions for estate, gift, and generation-skipping transfer (GST) taxes. Prior laws incorporated “sunset” provisions for tax rates and exemptions that made long-term estate and gift planning difficult. The new law deletes references to sunsets.

Key provisions of the Act include:
  • The maximum estate, gift, and GST tax rates are 40%, up from 35% in 2012, but less than the 45% top rate proposed by the Obama Administration.
  • The estate, gift, and GST tax exemptions remain unified and at $5,000,000 per person, adjusted for inflation. For 2013, the exemption as adjusted is $5,250,000.
  • The concept of portability, which allows the unused estate and gift tax exemption of the first spouse to die to be used by the surviving spouse, has been continued under the Act.
  • The Act extended, through 2013, the ability to make tax-free distributions from traditional and Roth individual retirement plans to charity of up to $100,000 for individuals who have reached age 70½.
It is also important to understand what did not change as a result of the Act:
  • The Act does not prohibit the use of discounts in valuing interests in business entities for transfer tax purposes, as had been proposed by the Administration. Therefore, such discounts continue to be available.
  • The use of intentionally defective grantor trusts in estate and gift planning can continue as Congress did not adopt a proposal by the Administration that assets in such a trust must be included in the estate of the grantor.
  • Short-term grantor retained annuity trusts (GRATs) remain a useful estate planning tool. A proposal to require GRATs to have a minimum term of ten years was not adopted by Congress.

So what does this mean for the client?

Assuming that we can rely on Congress’ promise that these changes are permanent, it will make estate and gift planning somewhat easier and long term planning more effective.
  • Clients will initially need to review their current documents to determine whether any changes are warranted as a result of the Act. However, frequent reviews every year or two each time Congress has made substantial changes in the law will no longer have to be made. Of course, changes in client assets, testamentary goals and family situations may require modifications to documents. We continue to recommend that clients review their estate plans every five to ten years.
  • Estate plan documents often include the use of a “credit shelter” or “family trust” funded with the amount equal to the estate tax exemption in order to avoid estate taxes at the death of the surviving spouse. Single clients whose assets total less than the exemption, and married couples whose assets total less than the combined exemption, will need to decide whether to continue to use such family trusts in their estate planning documents. However, there are numerous other reasons to use such trusts in an estate plan, such as for creditor protection, avoidance of mismanagement of assets by the surviving spouse and preservation of assets for minor children and other beneficiaries. In many cases, such a trust will still offer advantages over portability of the estate tax exemption.
  • In the case of a credit shelter or family trust established by the estate of a spouse who has previously died, the higher estate tax exemption available to the surviving spouse may make such trust unnecessary from an estate tax planning viewpoint, although, as discussed above, there may be other reasons to continue such a trust. For those clients interested in the possibility of terminating a previously funded credit shelter or family trust, please see “Termination of Credit Shelter Trusts.”

We recommend that clients meet with their estate planning attorney to discuss these changes in detail and determine whether any changes in their documents should be made.


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.

© Poyner Spruill LLP | Attorney Advertising

Written by:

Poyner Spruill LLP

Poyner Spruill LLP 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.
Custom Email Digest
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 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:

- 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.