November 13, 2012 | Updated: January 29, 2019

By Ramonica Jones

If you have been putting off creating an estate plan or haven't updated it in years, upcoming changes in tax laws might spur you into action.

The current estate tax laws will expire at the end of 2012. Unless Congress intervenes before that time, you will see significant changes. Here is a preview of what you can expect:

  • Income and capital gains taxes will both increase and the estate, gift and generation-skipping tax—the shift of property by gift or at death to a person who is two or more generations below that of the person granting the gift—exemptions will change dramatically in 2013. The basic exclusion amount—the amount you can own before your estate is subject to estate taxes—lowers from $5.12 million in 2012 to $1 million in 2013.
  • The top estate tax rate also increases from 35 percent to 55 percent. That means, for every dollar you own more than the $1 million exemption, up to 55 percent will be subject to federal estate taxes upon your death.

Thus, if you haven't drawn up an estate plan yet, there may be no better time to do so. Here are some other federal tax laws affecting estate planning in 2013:

  • Capital gains and income taxes raised: Capital gains taxes will increase from 15 to 20 percent and the top income tax rate has been raised from 35 percent in 2012 to 39.6 percent in 2013.
  • Gift tax exemption lowers: The gift tax exemption lowers from a $5.12 million exclusion amount unified with the estate tax exemption to $1 million in 2013. The top gift tax rate will rise from 35 percent to 55 percent. The annual gift tax exclusion—the amount you can give to anyone gift tax–free each year—is projected to be at $13,000 ($26,000 for married couples), adjusted for inflation.

And of course, please consider including Special Olympics Texas in your year-end or estate planning!

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