News & Updates

State Estate Tax
posted 7/30/2013

Add North Carolina to the list of states without an estate tax.  The Governor of North Carolina recently signed a bill repealing the estate tax effective January 1, 2013.

Currently only a handful of states and the District of Columbia collect a state estate tax. Below is list of states that are collecting state estate taxes as of 2013 along with each state's respective state estate tax exemption.

State                                                    2013 Exemption

Connecticut                                          $2,000,000

District of Columbia                              $1,000,000

Hawaii                                      $5,250,000 (tied to federal estate tax exemption)

Illinois                                       $4,000,000

Maine                                                   $2,000,000

Maryland                                              $1,000,000

Massachusetts                          $1,000,000

Minnesota                                            $1,000,000

New Jersey                                          $675,000

New York                                            $1,000,000

Oregon                                                 $1,000,000

Rhode Island                                        $910,725

Tennessee                                            $1,250,000

Vermont                                               $2,750,000

Washington                                          $2,000,000

Note that the state estate tax is in addition to the federal estate tax.  Currently the federal estate tax exemption is $5,250,000 per person.  With the exception of Hawaii, the state estate tax exemptions are lower than the federal exemption.  For example, in Massachusetts there is a $4,125,000 gap between the federal exemption and the state exemption.  Accordingly, it is critical for married couples to plan properly to avoid unnecessarily incurring state estate tax in the estate of the first spouse to die.  Typically this involves the use of a trust designed to maximize both state and federal exemptions and defer all estate taxes until the second death.  Another option for clients to avoid state estate tax is establishing residency in a state that does not impose an estate tax, such as Florida, New Hampshire, and now, North Carolina.

Please contact us if you have any questions about your estate plan.

IRA Charitable Distribution for 2013
posted 7/30/2013

Making a Qualified Charitable Distribution from an IRA is a convenient way to satisfy Required Minimum Distribution requirements, support charitable causes and receive a tax break all at the same time. 

What?  Under the American Taxpayer Relief Act of 2012 (ATRA), Congress extended for one year the provision allowing for Qualified Charitable Distributions (QCD) from IRAs.  This is a temporary extension and expires on December 31, 2013.

Who?  The provision allows retirees 70 ½ or older to make a direct distribution up to $100,000 from an eligible IRA to a charity.  Eligible IRAs include traditional IRAs or Roth IRAs. Other forms of retirement plans such as 401(k)s and 403(b)s, pensions, profit sharing plans, Keogh plans, and employer- sponsored SEP IRAs and Simple IRAs are not eligible. But it may be possible to roll assets from a 401(k), a 403(b) or a Keogh plan into a traditional IRA in order to take advantage of the provision.

Why?  The amount distributed to a charity from the IRA under this provision is excluded entirely from the retirees AGI (Adjusted Gross Income).  Ordinarily when a retiree 70 ½ or older takes his or her Required Minimum Distribution (RMD) each year, the RMD increases AGI, resulting in a greater portion of Social Security benefits being taxed, phase-outs of personal exemptions and itemized deductions and potentially higher Medicare Part B premiums.  By directing that up to $100,000 of the RMD pass to charity, retirees can avoid including the amount in AGI altogether.

How?  The distribution must be made directly from the IRA custodian to the charity.  The retiree would contact the IRA custodian as to the recipient and amount.  The IRA custodian would then transfer the funds directly to the charity.  Alternatively, the IRA custodian could send a check payable to the charity to the retiree, who then mails it to the charity.

By Jennifer W. Murray (posted 2/21/2013)

          Below are the key features of the American Taxpayers Relief Act.   

1.  Individual Income Tax Rates.  Remain the same for many people (10%, 15%, 25%, 28%, 33%     and 35%).  A 39.6% rate applies to income above a certain threshold - $450,000 for married taxpayers and $400,000 for individual taxpayers. 

2.  Capital Gain and Dividend Rates.  The top rate for capital gains and dividends will permanently rise to 20% (up from 15%) for taxpayers with incomes exceeding $400,000 (individual) or $450,000 (married).  For taxpayers whose ordinary income is generally taxed at a rate below 25%, capital gains and dividends will permanently be subject to 0% rate.  Taxpayers who are subject to a 25% or greater rate on ordinary income, but whose income levels fall below the $400,000/$450,000 thresholds, will continue to be subject to a 15% rate on capital gains and dividends.  NOTE: the 3.8% Medicare Surtax also applies to these items if adjusted gross income exceeds $250,000 (married)/$200,000 (individual).

3.  Estate and Gift Tax Rates.  The maximum rates are increased to 40%.

4.  Unified Credit for Transfer Taxes/GST Exemption.  Remains at $5,000,000 adjusted for inflation (for 2013, $5.25 million).  Portability of unused credit between spouses has also been retained.

5.  Medicare Surtax.  Starting in 2013, the Patient Protection and Affordable Care Act (the "PP Act") implements a 3.8% surtax on net investment income over certain income thresholds.  Net investment income includes interest, dividends and capital gains.  The PP Act surtax kicks in for taxpayers with modified adjusted gross income over $250,000 (married filers) or $200,000 (individual filers).  The surtax will also apply to irrevocable trusts with investment income over $11,950.

6.  That “Other” Medicare Surtax.  High earners will also be subject to an additional 0.9% Medicare Surtax (for higher income taxpayers, the 1.45% Medicare tax will be increased to 2.35%).  This additional surtax will apply to wage earners and those earning self- employment income once total earnings exceed the $200,000/$250,000 thresholds.  Employers will start to withhold once wagers go over that threshold.  This tax is in addition to the 3.8% Medicare surtax on net investment income.


Kiddie Tax Exemption


Special Use Valuation Reduction Limit


Regular Gift Tax Annual Exclusion


Increased Annual Exclusion for Gifts to Noncitizen Spouses


Reporting Foreign Gifts

$100,000 for gifts from nonresident alien individuals or foreign estates, $15,102 for gifts from foreign corporations and foreign partnerships

Foreign Earned Income Exclusion


Social Security Wage Cap


401k Limit


Defined Contribution Plan Limit


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